Source: https://procedurallytaxing.com/category/appeals/
Timestamp: 2019-04-19 08:48:14+00:00

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The order in Toney v Commissioner actually deals with the oft questioned “prior chance to argue the underlying tax” blogged about hereand here among others. The case is a pretty clear loser on that point, since Mr. Toney had previously had Appeals conferences and argued the tax. But it got me thinking about a different issue that I have had with the IRS: specifically, how to approach Form 12257 “Waiver of CDP Rights and Summary Notice of Determination” from both legal and tactical perspectives.
In Toney, the taxpayer and the IRS settlement officer came to an agreement to full-pay the liability within 60 days. The settlement officer prepared the 60-day extension form and a Form 12257 “Summary Notice of Determination” and sent it to Mr. Toney. A Notice of Determination (and the judicial review it affords) seemed unwarranted, since both parties agreed on the proper outcome.
But for reasons unknown Mr. Toney did not full pay and did not sign the Form 12257. The IRS settlement officer got tired of waiting and sent a Notice of Determination sustaining the lien instead.
From the outset it is important to note that Form 12257 is likely NOT a determination for IRC 6330(d)(1)purposes, despite having the phrase “Summary Notice of Determination” as its header. It is really more of a contract, and in any case too contingent to be a “determination.” For one, the taxpayer has to sign it to give it force, and for two even if the taxpayer signs it, it still requires secondary approval by an IRS Appeals manager. See Fine v. C.I.R., T.C. Memo. 2016-217. In any event, the IRS does not treat it as a Notice of Determination (and no Tax Court decision has either): if the taxpayer does not sign and return Form 12257, the IRS sends an actual Notice of Determination to the taxpayer later.
Because it is not a Notice of Determination, it neither starts the clock running on petitioning Tax Court nor gives the Tax Court jurisdiction on such a petition. In other words, nothing much happens until you sign and have the Form 12257 approved or the IRS gets tired of waiting and sends an actual Notice of Determination.
And that is where the question of tactics arises. After a CDP hearing in which there appears to be a meeting of the minds on the correct outcome, a friendly IRS Appeals/Settlement officer will often suggest signing a Form 12257 to “speed up the process.” For example, if both parties agree that the taxpayer should be eligible for a payment plan of $100/month, why even retain judicial review? Why not just enter into the plan and waive the right to review?
One might be concerned that after waiving the right to judicial review the IRS will take some action that seems inconsistent with (or just completely reneges on) the agreement the parties came to. Not to worry, the IRS Appeals/Settlement Officer may retort: the very terms of Form 12257 provide “I [the taxpayer] do not waive my right under Appeals’ retained jurisdiction to receive another hearing with Appeals if I disagree with the IRS over how it followed Appeals’ determination.” In other words, Appeals still has your back if the IRS doesn’t follow through on its apparent promises.
Yet believe it or not, having Appeals retain jurisdiction but without Court review is likely cold comfort for many practitioners. Generally, I give fairly high marks to IRS Appeals… when it is localIRS Appeals. When the IRS Appeals/Settlement officer is at a “campus” (Fresno comes to mind) my experiences have been, shall we say, less encouraging. It is in precisely those situations that I am reluctant to sign away the right to judicial review.
Perhaps because of this the best practice is to insist on an ACTUAL Notice of Determination. On the downside, this slows things down and creates more work for the IRS which in turn might not make for the most collegial relationship with the Appeals/Settlement officer. On the plus side, you’re here to look out for your client’s interests not the workload of the IRS, and frankly because part of the problem stems from impersonal IRS campus officers, developing relationships with them might be close to impossible. I can think of exactly one campus AO that I’ve had twice, and I’m not positive she remembered me. Of course, some consideration hinges on just how valuable Tax Court review of a collection action is under the fairly permissive “abuse of discretion” standard of review.
But assuming (as I do) that having access to Tax Court review is better than not, a problem remains. In the hypothetical I’ve proposed, you have reached a meeting of the minds with the IRS after a CDP hearing. Say both parties agree to an Installment Agreement and that the IRS will release a lien after three monthly payments are made. You nonetheless insist on a Notice of Determination, since you’d rather have the option of court review than not: you trust the Appeals/Settlement Officer but want to be sure the IRS follows through.
What good is the Notice of Determination in that instance? If three months later the IRS does not withdraw the lien what judicial review do you have? Your ticket has expired by the time you have cause to use it. I suppose one could argue on some sort of contract theory ground that failure of the IRS to properly follow through with the Form 12257 terms should be litigable. But I’d rather not mess around with that, and I’m not sure that in any case the Tax Court (which, lest we forget, is of eminently limited jurisdiction) would be amenable to the argument.
And so I end with a humble question to the readers of PT on this conundrum: what are the best practices you’ve found for working with Form 12257? Has it been an issue? Have you had post-CDP actions taken by the IRS that have caught you off-guard (either from Form 12257 or a Notice of Determination)?
The Chamber of Commerce, no stranger to cases challenging fundamental issues in tax procedure, has filed an amicus brief in the case I discussed earlier this week where Facebook is suing IRS due to the agency denying Facebook access to Appeals.
Taxpayers no longer can feel confident that they will have access to an independent forum to serve as a safety valve on an overzealous examination team. Taxpayers and examination teams alike may focus more energy on convincing IRS Counsel whether it is in the interests of “sound tax administration” to permit access to IRS Appeals at the expense of devoting effort to developing the merits of the issues in the case. The effects of Revenue Procedure 2016-22 will be felt far beyond those cases in which access to IRS Appeals is actually denied.
Whatever the underlying merits of the IRS Appeals process, and Facebook’s claims in this case, it is nonetheless astonishing for the IRS to argue in its Motion to Dismiss that it has the authority to deny taxpayers access to an independent administrative forum in an arbitrary and capricious manner, and that taxpayers that are adversely impacted by those actions have absolutely no judicial recourse. Whatever one can say about the goals of “sound tax administration,” a system in which the IRS is above the law—the very same law that applies to all administrative agencies of the federal government—is not one that the Supreme Court has approved and is not one that this Court should approve.
The Chamber brief hangs its hat in part on the argument that the courts have been pushing back on tax exceptionalism. That to me is atmpospherically relevant, but it proves too much: administering the tax system is different from say regulating noxious emissions or ensuring airplane safety. The devil is in the details of the particular procedures or path IRS believes warrant a separate approach.
IRS has not helped itself in this case though by promulgating essentially a standardless standard that allows Counsel to bypass Appeals that as the brief indicates allows Counsel to “mask illegitmate reasons for denying access to Appeals.” Even if in this case the reason for cutting off access to Appeals is legitimate, the lack of guidance on what should inform or explain that bypass decision generates a perception of illegitimacy, and that is not sound tax administration.
Facebook and IRS are squaring off in Tax Court over billions in taxes relating to its transfer of intangible assets to Irish subsidiaries. That fight has spawned major procedural side skirmishes in a California federal district court, including battles over privilege and IRS’s refusal to allow the social media giant access to Appeals.
Perhaps in a later post I will return to the interesting privilege battles. This post is about the important legal issues in Facebook’s challenge to the IRS’s rules that allow Counsel discretion to eliminate a taxpayer’s right to Appeals.
In its response to government’s motion to dismiss Facebook argues that RRA 98 and Section 7803(a)(3)(E), taken together, mean that IRS is not free to cut off Appeals’ rights as it has done via the revenue procedure (and as an aside in the IRM when it allows for bypassing Appeals in cases designated for litigation). In making its argument, Facebook claims that TBOR itself creates a substantive right. In response to the IRS view that Section 7803(a)(3)(E) does not directly provide a remedy for violations, Facebook argues that when Congress explicitly directs agency action (as it argues was done with Appeals consideration), an agency cannot dismiss that as meaningless. In addition, Facebook claims that Section 7803(a)(3)(E) justifies the court ordering a remedy for agency violations, through Supreme Court precedent that courts should not read language in statutes as “mere surplusage.” This argument syncs with our recent guest post on the subject.
The government makes a number of arguments in response, including that TBOR merely expresses general principles and does not create binding rights, the TBOR reference to an independent forum refers to judicial and not administrative review, and that in any event Facebook does not have Article III or statutory standing to bring the litigation.
The matter is scheduled for a hearing in April. We will keep a close eye on this litigation.
Even apart from this case, the broader issue of the role of taxpayer rights in tax procedure is an issue that is picking up steam and is likely to become one of the major issues in tax procedure in the next few years. On PT Christina Thompson recently discussed Alice Abreu and Richard Greenstein’s article on taxpayer rights (which flags some of the issues in this litigation). In addition, Keith and I will be on a panel at the Tax Court judicial conference in Chicago later this month that will consider taxpayer rights, and in May Alice and I will be moderating two panels at the ABA Tax Section Individual and Family Tax Committee and Pro Bono and Tax Clinics Committee that will consider rights in controversies and include more on the Facebook litigation. One of the main promoters of taxpayer rights in tax administration, Nina Olson, is convening the third International Taxpayer Rights Conference in May.
In six prior posts since September 2015 (here, here, here, here, here, and here), I have blogged about the storm at the SEC over whether its ALJs need to be appointed under the Appointments Clause or are mere “employees”, who do not need to be appointed. This issue could spill over into whether the ALJs that the Treasury uses to try Circular 230 sanctions matters need to be, and are properly, appointed. I suspect that they may not be.
I noted that in the courts of appeals, the government took the position that the SEC ALJs were mere employees, so there was no problem in the fact that SEC ALJs had been issuing recommended rulings on administrative sanctions matters without having first been appointed. Two Circuits had split on this question: The Tenth Circuit held that SEC ALJs need to be appointed; Bandimere v. SEC, 844 F.3d 1168 (10th Cir. 2016); while the D.C. Circuit held that they did not. Raymond J. Lucia Cos., Inc. v. SEC, 832 F.3d 277 (D.C. Cir. 2016). I correctly predicted that the Supreme Court would grant cert. to resolve this issue. In fact, the Court did so in Lucia on January 12, 2018. But, I never predicted that in the Solicitor General’s response to the cert. petition in Lucia he would change position 180 degrees and now argue that SEC ALJs have to be appointed. Presumably since the government was no longer seeking to reverse the ruling in Bandimere, the Court did not grant the government’s cert. petition in Bandimere.
This means that both of the parties to the Lucia case currently argue for its reversal. Although it has not done so yet, I suspect the Court will appoint an amicus to argue in favor of the ruling below, since the parties won’t. It is expected that Lucia will be heard and decided by the Court before its current Term ends on June 30.
Central to the Lucia case will be what the Court meant in Freytag v. Commissioner, 501 U.S. 868 (1991), when it held that Tax Court Special Trial Judges (STJs) were inferior officers of the United States who need to be appointed.
In Freytag, the Supreme Court held that the Appointments Clause did not prohibit the Tax Court’s Chief Judge from appointing STJs because the Tax Court was one of the “Courts of Law” mentioned in the Clause and because the Chief Judge could act for the Tax Court. In reaching these rulings, the Supreme Court made a subsidiary holding that STJs are not employees of the government, but inferior officers who need to be appointed. To support its holding that STJs are officers, the Supreme Court cited the many judicial duties that STJs perform. At the end of this section of the opinion, the Supreme Court also observed that STJs can enter final decisions in some cases under § 7443A(c). It is this finality observation that has puzzled and split the lower courts.
In Landry v. FDIC, 204 F.3d 1125 (D.C. Cir. 2000), a majority of a 3-judge panel of the D.C. Circuit held that the Supreme Court’s observation in Freytag that STJs can rule with finality in some cases meant that being able to make a final ruling was a but for requirement of officer status. Since FDIC ALJs could not enter final rulings, but simply made recommended rulings to the whole FDIC, the majority held that the ALJs were mere employees who did not need to be appointed. The third judge on the panel argued instead that, in Freytag, the Supreme Court had already decided that STJs were officers before it made the observation about STJs being in some cases allowed to enter final orders, so finality was not a but for requirement of an officer.
Like FDIC ALJs, SEC ALJs cannot make final rulings – at least where defendants appeal their proposed ruling to the whole SEC. In Bandimere, the Tenth Circuit disagreed with the Landry majority that being able to issue final rulings was a but for requirement of officer status. The Tenth Circuit held that the SEC ALJs performed nearly all the duties that STJs did, so were also officers who needed to be appointed.
In Lucia, citing Landry, the D.C. Circuit held that SEC ALJs need not be appointed because they did not have final ruling authority. After Bandimere was issued, Lucia moved for reconsideration of the ruling in his case by the full D.C. Circuit. He asked the D.C. Circuit to consider whether it should overrule Landry and agree with the Tenth Circuit in Bandimere. An en banc rehearing was granted. However, the en banc D.C. Circuit split evenly on the question, which left the original holding in Lucia intact. Lucia then sought cert.
In response to Lucia’s cert. petition, the new SG under President Trump surprisingly changed the government’s position – agreeing with the Tenth Circuit that the ability to issue final rulings was not a but for requirement of officer status. The SG felt that the SEC ALJs were sufficiently like Tax Court STJs to have to be appointed. Thus, the SG also sought reversal of the D.C. Circuit. The SG asked the Court to grant cert. in Lucia, even though the parties were no longer in disagreement. (Appointments Clause issues are not jurisdictional, so the courts can accept the parties’ waiver of Appointments Clause arguments.) The SG thinks there is a need for Supreme Court guidance in this area – including issues not discussed below as to removal powers for ALJs, which may now be problematic. A number of Court watchers thought that the issue of appointment of SEC ALJs was now moot and that cert. might not now be granted. However, they were wrong.
But, in granting cert. in Lucia, the Supreme Court did not ask the parties to brief any additional questions – e.g., involving removal powers.
In addition to Lucia’s possible impact on ALJs used by Treasury to hold Circular 230 sanctions hearings, the opinion may have an impact, as well, on an issue that I raised over a decade ago. In a CDP case that I had in the Tax Court, I moved to remand the case to have the CDP hearing redone by a Settlement Officer and Appeals Team Manager who were both appointed consistently with the Appointments Clause. I noted that no Appeals personnel were then appointed. But, citing Freytag, I argued that the duties of Appeals personnel in conducting statutorily-mandated CDP hearings were so similar to the duties of an STJ that such Appeals personnel were also officers for purposes of the Appointments Clause.
In Tucker v. Commissioner, 135 T.C. 114 (2010), the Tax Court rejected my argument for several reasons. For one thing, the court felt that the positions in Appeals were not “established by law” for purposes of the Clause. But, also, the Tax Court held that Appeals personnel in CDP did not make final rulings, and, citing Landry, the Tax Court held that the ability to make a final ruling was a but for requirement of officer status per Freytag.
I appealed Tucker to the D.C. Circuit. That court, at 676 F.3d 1129 (D.C. Cir. 2012), affirmed the Tax Court, but on different reasoning. The D.C. Circuit was troubled by the idea that Congress might be able to get around the Appointment Clause by assigning duties that had to be performed by a constitutional officer to preexisting employees in the bureaucracy. Therefore, the D.C. Circuit bypassed issuing any ruling on whether or not the position of CDP hearing person was “established by law”. The D.C. Circuit next held that collection issues were of too minor importance to require an officer. As to underlying tax liability rulings that could be made in CDP under section 6330(c)(2)(B), Freytag clearly would treat those rulings as ones for which an officer was required. Disagreeing with the Tax Court, the D.C. Circuit held that Appeals Office personnel issuing underlying liability rulings issued rulings with “effective finality”. However, the D.C. Circuit held that the ability to exercise discretion in a tax liability ruling was a but for requirement of officer status – one that was not met by Appeals personnel who ruled under the thumb of IRS Counsel attorneys. It was this lack of discretion that undermined the idea that Appeals personnel in CDP were officers needing to be appointed.
I thought that the D.C. Circuit’s ruling that Appeals exercised little discretion in making CDP underlying liability rulings was not factually supported, and I sought cert. But, cert. was denied.
I had not expected to again litigate the Tucker issue, but Florida attorney Joe DiRuzzo has decided that he wants to relitigate the issue in the Tax Court and in courts of appeals – hoping to create a Circuit split. Before the Supreme Court granted cert. in Lucia, Joe had made motions to remand in (at the moment) four different pending Tax Court CDP cases, arguing that the hearings should be redone by appointed Appeals personnel. The cases are: Thompson, Docket No. 7038-15L (appealable to the Ninth Circuit); Elmes, Docket No. 24872-14L (appealable to the Eleventh Circuitt); Fonticiella, Docket No. 23776-15L (appealable to the Eighth Circuit); and Crim, Docket No. 16574-17L (appealable to the D.C. Circuit). If the Supreme Court agrees with Lucia and the SG that issuing final rulings is not a but for requirement for officer status, then the Tax Court will have to at least revise its rationale for its holding that CDP hearing personnel need not be appointed. Perhaps, after reading the Supreme Court’s Lucia opinion, the Tax Court may also have to rule that CDP hearing personnel need to be appointed. In its lengthy response to the motion to remand (filed on January 5, 2018 in the Thompson case – i.e., a week before the Supreme Court granted cert. in Lucia), the IRS discusses the possible relevance of Lucia and the SG’s change in position, but argues that Landry, Lucia, and both Tucker opinions are, at least at the moment, still good law.
Over the past year, the decision by Appeals to no longer hold face to face meetings and the subsequent partial reversal of that decision served as the highest item of interest regarding Appeals. Taxpayers with cases involving controversies large enough to warrant assignment to an Appeals Officer in the field can now obtain a face to face conference with Appeals again. Taxpayers whose cases do not have sufficient dollars at issue continue to be sent to the back of the bus because the low dollar amount of their controversy means their cases get assigned to low graded Appeals employees who reside in the six Service Centers where Appeals has employees.
One of the concerns that Appeals has in allowing the case of a taxpayer with a small amount of tax at issue to meet with a “live” Appeals employee in a face to face meeting is that the case is scored for assignment to a low graded Appeals employee and in the local offices Appeals does not have low graded employees, or enough low graded employees, so it needs to send these case to the Service Centers where the low graded Appeals employees reside. Because of the limited geographical availability of these employees and the fact that Service Centers do not really accommodate meetings with taxpayers, taxpayers with smaller dollars at issue continue to have the pleasure to deal with the IRS via phone and fax just as they did during the examination phase of their case.
On the listserv for clinicians who work on cases involving low income taxpayers, a new issue concerning Appeals emerged recently. The new issue involves the manner in which Appeals notifies the taxpayer, or the representative, of the assignment of the case in Appeals. Several individuals posting to the listserv reported receiving contact via phone instead of mail of the assignment of the Appeals employee and some reported that in that phone contact the Appeals employee also wanted to discuss the merits of the case. Because the phone contact came “out of the blue” with no opportunity for the person receiving the call to prepare for the discussion, the representatives receiving these calls invariably sought to put off the discussion of the case with varying degrees of success. In questioning the Appeals employee about the approach of calling out of the blue to discuss a case with prior correspondence, some representatives received the explanation that Appeals no longer sent letters in order to save money.
Donna Hansberry, the Director of Appeals, attended the most recent Low Income Taxpayer Clinic conference on December 7 to discuss the interplay between Appeals and those representing low income taxpayers. She did not seem to be aware of any changes within Appeals that stopped the employees from sending letters to taxpayers and representatives upon assignment of the case and that encouraged Appeals employees to “cold call” taxpayers or representatives seeking to discuss the case. She asked that attendees send her information about this practice and also solicited comments on what Appeals should adopt as the best practice for notifying taxpayers and representatives of the case assignment as well as notifying them of the time (and for taxpayers owing sufficient money, the place) for holding the Appeals conference.
One of the slides she used in her presentation showed that the number of Appeals employees in the past three years. She said that the number has dropped by 1/3 since 2010. The number of cases has dropped but not by the same percentage.
Another slide she displayed showed the breakdown of the caseload in Appeals which is now heavier on collection cases than examination cases.
Because Donna solicited feedback on this issue, PT will be glad to collect feedback and forward it to her. If you have experienced the type of cold call described above, let us know by sending in a comment. We also will forward to her suggestions on how to make the interaction with Appeals work best. Do you want a letter immediately upon assignment of the case to an Appeals employee letting you know the name, address, fax number and phone number of the employee and then another letter setting up the conference? Is there a way to reduce the number of letters and still allow you to properly prepare for the Appeals conference? Let us know your thoughts so we can pass them along or pass them along directly to Appeals.
We discussed last year around this time that Appeals was putting in place procedures that severely limited the opportunity for face to face meetings. Practitioners strongly opposed Appeals’ decision. While this past summer Appeals announced that it was piloting a web based virtual conference option, in the last few weeks leadership in Appeals has told practitioners that it is going to offer face to face in person conferences again for cases in field offices. To reflect the change, we understand that Appeals will soon publish interim guidance. While Appeals has decided not to offer virtual face to face meetings for the issues it handles in Service Centers it did not rule it out in the future if it could work out logistical barriers to doing so.
The decision to review and allow taxpayers the demonstrates that Appeals’ meetings with practitioner groups (such as the ABA Tax Section) was not for show and that despite losing 1/3rd of its staff since 2010 Appeals is committed to trying to work out cases in the most effective manner.
Earlier this week Keith discussed the differing views that former Tax Court Judge Kroupa and the government had on sentencing. Yesterday the court, agreeing with the government, sentenced former Judge Kroupa to 34 months. Her ex-husband received 20 months. The Minnesota Lawyer recounts the tale; for those interested our prior posts link to the underlying documents in the case.
The new approaches being put into place by Appeals make it appear as though Appeals no longer trusts its own Hearing Officers and that these Hearing Officers require the guidance and oversight of Counsel and Compliance to reach the correct determinations. As a former practitioner, I would think long and hard before bringing a case to Appeals under these new rules.
There is lots of talk this week on the Senate’s proposed health care legislation. On a separate legislative track is deeper tax reform for business and individual taxpayers. On Procedurally Taxing we steer clear from most of the big macro policy issues underlying the tax reform policy choices. We have, however, noted that many reform proposals do implicate key issues of tax administration. For example, last year Keith discussed the House Blueprint for tax reform and its proposal to add a new small claims court to hear tax cases.
Look at what happens during tax season. I could describe the complexity of the code all day, but what really defines our tax code is that sense of dread that you feel. You know that feeling?
You have to navigate long, complicated forms to file your returns. You need to wade through a seemingly endless amount of deductions and credits, each with its own rules and eligibility requirements.
And then, after you tally up those deductions, you are placed in up to seven different federal tax brackets based on your income level.
And at the end you hope—I mean really hope—that you do not owe a bunch this year. You hope, because you do not really know ahead of time. How could you? This whole system is too confusing, and just too darn expensive.
First, we will eliminate harmful, burdensome taxes including the death tax and Alternative Minimum Tax.
Next, we will clear out special interest carve outs and excessive deductions, and focus on keeping those that make the most sense: home ownership, charitable giving, and retirement savings.
We will consolidate the existing seven brackets into three, double the standard deduction, and simplify things to the point that you can do your taxes on a form the size of a postcard. Wouldn’t that be nice?
And finally—and most importantly—we will use the savings from eliminating these loopholes to lower tax rates.
I am intrigued by the Speaker’s reference to the way that Americans meet their annual tax return obligations. A brief article from Bloomberg earlier this year estimates that only 5 million out of the 165 million or so individual returns are done manually.The overwhelming majority of Americans today do not wade through IRS forms. Instead, they answer user friendly prompts generated by increasingly freely provided software; those that do not use a DIY product either pay a preparer or use free preparers at VITA or TCE sites.
The Speaker is thinking about taxpayer burden using a 20th century model; fewer and fewer taxpayers actually work with an actual IRS form. The bigger point the Speaker makes though I think is that despite the decreasing mental burden on Americans in actually filing their tax returns, many Americans are clueless going into filing season when it comes to understanding their individual and family tax situation. Many Americans, especially lower and moderate income Americans, do not grasp the hodgepodge of credits and deductions that Congress has put in the Code for one reason or another.
If thinking about tax administration when it comes time to pass reform, Congress should simplify our tax system so the average American can understand what their return reflects and how their actions may in fact align with tax law. When thinking about tax reform, Congress should strongly consider paring back the myriad credits and deductions that leave most Americans befuddled. In addition, while Congress may choose (and have good reason) to use the IRS to administer social policy provisions, including some credits, actually aligning the substantive provisions with the reality of Americans’ lives would contribute to a tax system that the IRS could administer and the public could understand.
In Rev. Proc. 2016-57 the IRS announced a new fast track mediation specifically designed for collection cases (FTMC). The program will allow taxpayers with issues in offer in compromise (OIC) cases and trust fund recovery penalty (TFRP) cases to go to a mediator in Appeals to try to resolve an issue in their case which could provide the basis for overall resolution if the parties could reach agreement on that issue. I do not know how much demand exists for this type of mediation, but the effort to provide mediation in these fact intensive situations seems like an idea worth trying.
The Rev. Proc. points out that fast track mediation for SBSE cases has existed as a possibility since 2000 and the program included collection cases; however, mediation occurred in only a small number of collection cases. In 2011 the IRS introduced fast track settlement for examination cases but that initiative did not include collection cases. The idea for use of Appeals in FTMC does not include giving the Appeals employee settlement authority but rather to have them serve as a mediator acting as a neutral party to assist the taxpayer and the collection function in reaching agreement on a point of dispute.
Collection and Appeals will jointly administer the FTMC program. Because SBSE handles all of the collection cases for the IRS, taxpayers falling into any of the stovepipes into which the IRS divided itself in 2000 can use FTMC. The IRS envisions that FTMC will take place “when all other collection issues are resolved but for the issue(s) for which FTMC is being requested. The issue(s) to be mediated must be fully developed with clearly defined positions by both parties so the unagreed issues can be resolved quickly.” To use FTMC, both the IRS and the taxpayer must agree. Neither party can force the procedure on the other.
A catch-all provision that uses as an example whether a taxpayer’s contributions to a retirement savings account are discretionary or mandatory.
Whether the taxpayer properly designated a payment.
To issues otherwise excluded in subsequent guidance.
A taxpayer can request FTMC after full development of an issue and before Collection makes its final determination. The IRS has created Form 13369 for use in requesting this process. Both the taxpayer and the IRS must sign the firm in order to invoke the procedure. In addition to the form the taxpayer submits a written summary of their position with respect to the disputed issues and the IRS will submit a written summary as well. Once the parties have prepared the form and the statements, Collection sends the package to the appropriate Appeals office. The Appeals office decides whether to accept the case for FTMC. The taxpayer must consent to disclosure of their tax information to participants in the mediation and does this in signing the Form 13369.
The Rev. Proc. goes on to describe the manner of the mediation as well as the post-mediation process. If the mediation succeeds, it should allow the OIC or the TFRP case to move forward to resolution by removing a roadblock to agreement. If it does not succeed, the taxpayer still retains the right to appeal the denial of the OIC or to appeal the proposed determination of the TFRP. In this regard, the mediation seems to have little downside for the taxpayer except to the extent the denial of the mediation is perceived to have solidified the view of Appeals and keep the taxpayer from having a productive Appeals conference at a later stage. Because I have never used mediation, I have no basis for forming an opinion of the likely success of this new process. Perhaps those who have used it in the Examination context can comment on how it might work in these two specific collection situations. I suspect that training of IRS employees to spot situations in which it might assist and to have open minds about using the process will have a high impact on its success. If the employees considering OICs or TFRP assessments would prefer to move the case to Appeals in a more traditional manner than to have a mediator from Appeals intervene in their cases, the program will not succeed.

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