- 4.32.3.1 Appeals
- 4.32.3.2 Campus
- 4.32.3.3 Collection
- 4.32.3.4 Counsel
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The Office of Appeals (Appeals) has authority to consider and negotiate tax and penalty settlements as outlined in:
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Servicewide Delegation Order No. 66, as revised, Authority of Appeals in Protested and Tax Court Cases. See IRM 1.2.47, Delegation of Authorities for the Appeals Process.
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Policy Statement P-8-47, Consideration to be Given to Offers of Settlement. See IRM 1.2.1, Policies of the Internal Revenue Service.
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See IRM Part 8, Appeals, for a complete description of Appeals' mission, jurisdiction and program.
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Appeals participates in cross-functional working groups and Issue Management Teams to provide guidance on Appeals processes and potential resolution strategies.
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One role of Appeals is to provide an independent assessment of litigating hazards related to abusive tax avoidance transactions.
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For ATAT issues, this role is accomplished by using traditional appeals hearings and alternative dispute resolution (ADR) tools.
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Appeals coordinates ATAT issues where there is an approved Coordinated Issue Paper (CIP), otherwise known as a Compliance Coordinated Issue. Appeals also independently coordinates issues that have wide impact or importance, otherwise known as an Appeals Coordinated Issue (ACI). Appeals Settlement Guidelines are developed for each CIP or ACI.
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Once there is an approved CIP or ACI, the Appeals Technical Guidance (ATG) Coordinator generally has review and concurrence authority for all settlements of the issue. See IRM 8.7.3, Technical Guidance Programs, for additional information.
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Appeals also identifies emerging issues that are not officially coordinated within Compliance. This determination is based on the need to address some of the key aspects of an issue with Appeals Officers, assist them in the early stages of consideration of an issue, and promote consistency in the treatment of the issue in Appeals. In these cases, the Coordinator serves as an information resource.
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ATG Coordinators work closely with their counterparts in the Compliance Operating Divisions (Technical Advisors) and Counsel (Industry Counsel/IMT Lead Counsel). ATG Coordinators participate in SB/SE and LMSB training and train other Appeals Officers about emerging issues.
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Appeals has additional tools available for moving cases through the system: Fast Track Mediation, Fast Track Settlement, and Servicewide Delegation Order 4-25.
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Fast Track Mediation (FTM) - Appeals facilitates communication between taxpayers and SB/SE Compliance to help resolve factual issues. FTM, described in Rev. Proc. 2003-41, Appeals Fast Track Mediation Procedure , is designed to help SB/SE taxpayers resolve disputes resulting from examinations and collection actions. Most non-docketed cases qualify for FTM.
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Fast Track Settlement (FTS), described in Rev. Proc. 2003-40, LMSB/Appeals Fast Track Settlement Procedure, is a broader process that can be elected by taxpayers. FTS is a collaborative alternative dispute resolution process that uses mediation techniques to focus on issues and lead the parties to earlier resolution of the dispute. FTS takes place while the case is in Compliance jurisdiction and is designed to be completed in approximately 120 days. Refer to IRM 4.51.4, LMSB Examinations - LMSB/APPEALS Fast Track Settlement Program (FTS), for further information on the FTS process.
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Under Servicewide Delegation Order 4-25, Settlement Offers, Closing Agreements, and Settlement Agreements under Section 6224(c) in Cases with Technical Advisor (TA) Program Issues and Appeals Technical Guidance Program (Compliance Coordinated and Appeals Coordinated) Issues,, (formerly Delegation Order 247), LMSB Team Managers and SB/SE Territory Managers offer a settlement using an approved Appeals Settlement Guideline (ASG). The manager must get the review and concurrence of both the ATG Coordinator and Compliance Technical Advisor for the specified industry or issue before finalizing a settlement with a taxpayer. See IRM 4.45.15, Issues and Issue Resolution, for Compliance procedures.
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Under Servicewide Delegation Order 4-25, Settlement Offers, Closing Agreements, and Settlement Agreements under Section 6224(c) in Cases with Technical Advisor (TA) Program Issues and Appeals Technical Guidance Program (Compliance Coordinated and Appeals Coordinated) Issues, IRM 1.2.43.6(14) et seq. for specific coordinated issues designated by the Chief Appeals Technical Advisors and managers offer a settlement using an approved ASG, without need for concurrence of the ATG coordinator.
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Appeals may participate on Abusive Transaction Teams and Issue Management Teams with representatives from one or more Operating Divisions and Counsel in a coordinated effort to combat abusive tax avoidance transactions and promotions. These teams develop proposed resolution and settlement approaches to specific abusive tax avoidance transactions, taking into account legal and factual considerations and the inventory of cases involving the issue. See IRM 4.32.1.4, Issue Management Team, for more information.
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A team may determine that existing traditional and alternative dispute resolution (ADR) processes are sufficient for handling a particular issue, or it may determine that a resolution initiative is appropriate. A resolution initiative may be a policy initiative, such as the Offshore Voluntary Compliance Initiative, or it may be a settlement initiative which accelerates Appeals’ consideration of the issue and gives taxpayers an opportunity to resolve their tax controversies early in the administrative process.
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For settlement initiatives, an ATG Coordinator identifies the inventory in Appeals and develops knowledge of the factual scenarios and the legal issues raised by taxpayers and representatives. The ATG Coordinator provides input about the administration and application of the proposed resolution, provides communication links within Appeals and to the working group, and writes Appeals Settlement Guidelines (ASG) that evaluate the hazards of litigation. Once the ASG is approved by the Director, Technical Services in Appeals, it provides the basis for any settlement initiative offered to investors.
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Appeals participation in shelter initiative workgroups always complies with the prohibition on ex parte communications. Question #15 in Rev. Proc. 2000-43, Prohibition Of Ex Parte Communications Between Appeals Officers and Other Internal Revenue Service Employees, states there is no prohibition on Appeals meeting with Compliance to discuss issues as long as specific taxpayers are not the subject. Appeals participates on the teams at the issue level only.
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Participant/investor case building has been centralized to better facilitate the initiatives for abusive tax avoidance transactions. Historically, the Ogden Campus has built domestic participant/investor cases from lists secured from promoter investigations and the Philadelphia Campus has built offshore participant/investor cases from lists secured from promoter investigations. However, the location of case building is at the discretion of the Campus Compliance Services WSD Program Manager. For specific information on the workload delivery, please refer to divisional procedures for the support functions in these locations referred to in IRM 4.32.2.13, Participant/Investor Cases.
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Collection’s early involvement and intervention is extremely important and a necessary step in all ATAT cases to ensure ATAT issues are addressed properly.
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SB/SE should coordinate with the Area ATAT Collection Coordinator at the start of a promoter investigation and request that a revenue officer be assigned to the case.
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LMSB Team Managers assigned to promoter investigations should also coordinate with the Area ATAT Collection Coordinator whenever the collectability of a potential penalty is a concern.
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SB/SE examiners are responsible for arranging meetings with Collection to be held within 2 weeks of case assignment. The purpose of these meetings is to exchange information between Examination and Collection to better enable each to perform their functions and to formulate a promoter investigation strategy. The attendees generally include the examiner, revenue officer, their respective managers, Counsel and if possible, the Area ATAT Collection Coordinator. Revenue officers should be prepared to identify any outstanding assessments against the promoter and examiners should be prepared to provide revenue officers with information in the investigation case file.
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Revenue officers, with examiner assistance, should identify available assets for collection of potential penalties. Revenue officers should ensure that the Service's ability to collect is not jeopardized by the promoter moving assets outside the reach of the Service. They should monitor for promoters transferring assets offshore, to nominees or otherwise, outside the Service's ability to collect. Revenue officers should consider the use of any appropriate collection tools including but not limited to administrative summons and jeopardy assessments (on participant cases).
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Refer to IRM 5.20, Collection Involvement in Abusive Tax Avoidance Transactions, for more information on Collection ATAT casework.
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This section provides information on Counsel's role in the ATAT process.
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SB/SE Division Counsel provides legal support and guidance throughout each step of promoter investigations and participant examination cases.
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SB/SE Area and Division Counsel are integral partners in the Service’s efforts to combat ATATs. SB/SE Counsel coordinates with the Department of Justice (DOJ) and all Operating Divisions, Counsel Divisions and Associate Counsel offices. SB/SE provides coordination and guidance on the early identification of technical shelters, including formulation of policy and legal positions, and continues its support throughout the ATAT process.
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SB/SE Division Counsel serves as a member of the SB/SE ATAT Executive Steering Committee (ESC), which provides leadership and executive oversight in implementing SB/SE’s ATAT program.
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SB/SE Division Counsel serves as a member of the SAT ESC which provides leadership, Servicewide coordination and policy regarding the Service’s methods of addressing ATATs.
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SB/SE Division Counsel receives information on emerging ATATs and refers it to the Senior Counsel to the Chief Counsel and provides early leadership and guidance regarding appropriate methods to address ATAT issues.
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SB/SE Counsel provides program advice to the SB/SE LDC and recommends approval of specific promoter investigations.
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SB/SE Counsel also assists in SB/SE training programs and IVTs.
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SB/SE Counsel attorneys provide legal support and guidance to the Service’s promoter investigations, including with respect to First Amendment issues. Counsel assists the Service as necessary in every aspect of its ATAT investigations. Examiners, revenue officers, and other support functions should not hesitate to call on SB/SE Counsel for advice.
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SB/SE Area Counsel attorneys and managers provide input and guidance during six-way conferences and during examination/collection meetings.
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SB/SE Area Counsel attorneys generally review IDRs, summonses, and interview questions and are available to assist with their preparation.
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SB/SE Area Counsel attorneys are available and encouraged to attend initial meetings with promoters or preparers, to answer questions and assist examiners in questioning promoters or preparers.
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SB/SE Area Counsel approves and refers all summonses related to promoter investigations directly to DOJ Civil Trial Section, Central Region for summons enforcement. This does not, however, change any of the general rules regarding level of review or required coordination within Chief Counsel, e.g., John Doe or case involving First Amendment issues.
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SB/SE Counsel continues to be an integral part of the Service’s team and is available to provide assistance throughout ATAT investigations.
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SB/SE Area Counsel assist examiners in determining whether there is sufficient evidence to refer a case to Counsel for preparing an injunction suit letter.
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Once a promoter case is referred to SB/SE Area Counsel, the assigned attorney analyzes the evidence to determine if is sufficient to warrant an injunction. If sufficient, the Area Counsel attorney prepares a referral letter and refers the case directly to DOJ, Civil Trial Section, Central Region.
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Counsel is designated as the referral authority by IRC §7401, and authorizes DOJ through the referral letter to file an injunction suit against the promoter under either IRC §7402, and/or IRC §7407 and/or IRC §7408.
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Counsel provides a copy of all referral letters to the SB/SE LDC Technical Advisor. Counsel coordinates with the IMT if one has been assigned to the issue, and also provides a copy of the DOJ referral letter to the IMT Lead Counsel. If no technical shelter is involved, Counsel may send a shorter, less detailed referral letter to DOJ. These referrals are sometimes called expedited referrals.
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If a promotion involves a technical shelter, it is deemed a Coordinated Referral case. Area Counsel must coordinate technical legal positions in these cases with the IMT Lead Counsel, or if none, with the SB/SE Assistant Division Counsel, ATAT and the appropriate Associate Chief Counsel Office as early as possible. Counsel prepares a more detailed referral letter in these cases and follows existing Chief Counsel coordination procedures before referring the case to DOJ.
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SB/SE Area Counsel provides advice regarding promoter and participant penalty assessments.
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SB/SE Counsel is available to provide support with ATAT participant examinations, such as:
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Summons language and enforcement.
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Taxpayer meetings.
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Statutory Notice of Deficiency language.
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Designating cases for litigation.
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SB/SE Counsel defends the Service’s positions and facilitates its goals through litigation and alternatives to litigation.
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SB/SE Counsel provides guidance on the collection of ATAT assessments, liens, levies, other collection avenues and program management.
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See IRM 4.32.3.3, Collection, and IRM 5.20, Abusive Tax Avoidance Transactions (ATAT), for further information on the role of Collection in the ATAT process.
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The United States Attorneys Office, including certain SB/SE Counsel attorneys designated as Special Assistant United States Attorneys (SAUSAs), represent the United States in Bankruptcy Court to protect the Service’s claims and interests regarding ATAT penalties and unpaid taxes arising from participation in ATATs.
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LMSB Division Counsel serves as a member of the Service-Wide Abusive Transaction Executive Steering Committee (SAT ESC) and helps to coordinate a Servicewide response to abusive tax avoidance transactions and promotions.
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LMSB Division Counsel has involvement in the following LMSB functions.
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LMSB Division Counsel serves as a member of the LMSB Tax Shelter Committee, which provides leadership and executive oversight in implementing LMSB’s tax shelter program. For more information on the LMSB Tax Shelter Committee, see IRM 4.32.2.3.3.2, LMSB Tax Shelter Committee.