More than three years ago, the Internal Revenue Service (IRS) revised the Internal Revenue Manual to provide IRS Appeals Division (Appeals) with discretion to invite representatives from the IRS Examination Division (Exam) and IRS Office of Chief Counsel (Counsel) to the Appeals conference. The IRS also started a three-year initiative for taxpayers under the Large Business & International (LB&I) Division with cases assigned to Appeals Team Case Leaders (ATCLs). Under the initiative, LB&I personnel from Exam and Counsel were invited to the non-settlement portion of the taxpayer’s Appeals conference to test whether the participation of both parties would assist Appeals in narrowing and resolving complex factual and legal differences.

The IRS announced that the initiative ended on May 1, 2020. The IRS has invited comments from the public about the initiative and its effectiveness. Such comments should be submitted by August 31, 2020.

The practice of inviting Exam team members and Counsel to the taxpayer’s Appeals conference generated significant controversy. In response to taxpayer concerns, certain clarifications were made. These included making clear that personnel from Exam and Counsel were not to participate in settlement discussions and mediation should not be used by ATCLs as a method of securing a settlement.

We have represented several taxpayers where Exam team members and Counsel have participated in the taxpayer’s Appeals conference. In some instances, Exam and Counsel did not hesitate to interrupt our presentation, disrupting the flow of the conference. When this occurred, we would request that the ATCL exert more control over the conference and prevent any interruptions until we had finished a point. We also had instances where ATCLs would ask Exam and Counsel what they thought was a fair settlement, which we did not view as appropriate.

Practice Point: Taxpayers and practitioners, particularly those anticipating upcoming Appeals conferences, may want to consider submitting comments on this issue. Our experience is that it is much easier to resolve matters on favorable terms when taxpayers and their representatives can speak directly to ATCLs without having everything filter through Exam team members and Counsel. Moreover, there is a mechanism in which you can change a typical Appeals conference into more like a mediation where Exam is involved in the negotiations; it is called Rapid Appeals. But when Exam is entrenched in its position, from our experience, the sooner you can discuss the issue directly and solely with the Appeals Officer, the better.