Appeals Finalizes Team Case Leader Initiative

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The Sixth International Taxpayer Rights Conference kicked off today with a workshop on ombuds and advocates and continues through Friday. As Nina Olson mentioned last week in Taxpayer Rights as Human Rights: Registration is open for the 6th International Conference on Taxpayer Rights, the conference focuses on taxpayer rights as human rights. It provides the opportunity to learn from the way other countries administer their tax systems. If you have the time I strongly encourage you to attend this year’s conference, which is online only.

As part of the conference, I will be speaking Thursday morning on a panel that looks at how the right to administrative appeals promotes integrity and fairness in the tax system. I am joined by the Governor of the Greek Independent Revenue Authority and Professor Carika Fritz from the University of Witwatersrand in South Africa.

One of the topics I will discuss on the panel is the IRS’s Independent Office of Appeals recent decision concerning the Appeals Team Case Leader Conferencing Initiative. As readers may know, back in 2017 Appeals (as of the Taxpayer First Act the IRS Independent Office of Appeals) initiated a pilot program where IRS Large Business and International Exam teams and their Chief Counsel Attorneys meet with Appeals, taxpayers and their representatives at the commencement of the Appeals process. The goal was to narrow the scope of controversies and improve Appeals’ understanding of any differing takes on the law and facts. 

The pilot was limited to large complex cases that are led by seasoned Appeals employees known as Appeals Team Case Leaders. When Appeals announced the pilot, practitioners, the NTA and IRSAC weighed in (see the 2017 NTA comments here and IRSAC here), with some comments expressing deep reservations about the possible impact of Appeals’ engagement with Counsel and compliance employees on public confidence in Appeals’ impartiality and independence.

Last month Appeals announced that it has concluded the pilot and reached a decision on the process going forward. Appeals will not mandate joint case discussions in every case but will continue to operate under policies that allow it, in its discretion, to invite Counsel and Exam employees into the non-settlement portions of the Appeals process.

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It has been a while since I was practicing at large law firms and worked on LB&I Appeals so I cannot speak personally to the experiences of those practitioners who may have strong views on this. I was impressed, however, by the Appeals memo that accompanied the decision to continue the practice. The memo itself discusses the external comments, identifies some of the suggestions practitioners made, and flagged the reasons why Appeals decided to continue and formalize the practice.  As an example of the transparency reflected in the memo, while rejecting the recommendation, Appeals candidly discussed the suggestion that several commenters made to tether the process to taxpayer consent.

In reaching this conclusion, we carefully considered the suggestion by several commenters that taxpayer consent be required for Compliance to attend the non- settlement portion of Appeals conferences. While we agree that an ATCL should always consider the taxpayer’s (or their representative’s) views about Compliance attending an initial case discussion, we left the decision within the ATCL’s sole discretion for several reasons. First, the discretion to invite Compliance to conferences has been Appeals’ policy since at least 1967. During this time, Appeals technical employees have used this discretion sparingly and responsibly. More importantly, requiring taxpayer consent would effectively substitute the judgment of the taxpayer (or the taxpayer’s representative) for the judgment of the ATCL on the question of how best the ATCL can fully understand the merits of both parties’ positions and fairly assess the hazards of litigation in complex cases.

Taxpayers are entitled to negotiate settlements with Appeals without Compliance’s participation but allowing taxpayers to limit Appeals’ ability to understand a case would undermine fair tax administration. ATCLs are highly experienced and knowledgeable tax professionals with the ability to independently judge the facts, law and litigating hazards and propose fair and reasonable settlements. Appeals leadership trusts their judgment in determining when it would be helpful to invite Compliance to attend an initial case discussion with the taxpayer.

Going forward the memo notes that Appeals will focus on best practices and identifies the need to ensure public confidence in the integrity and independence of Appeals. To that end, it states that it will continue to reflect on additional feedback and adjust policies to preserve public confidence in the process. The transparency and willingness to solicit information seems like a strong recipe for tax administration. Even if one disagrees with the conclusion in the memo it is refreshing to see an open discussion of how and why Appeals decided to continue with its policy.

About Leslie Book

Professor Book is a Professor of Law at the Villanova University Charles Widger School of Law.

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