Highlights of TIGTA's Report on the Overall Independence of Appeals
The Treasury Inspector General for Tax Administration (TIGTA) issued its final report on the results of their review to evaluate whether the Office of Appeals’ (Appeals) modernized structure and processes provide the level of independence intended by the Internal Revenue Service (IRS) Restructuring and Reform Act of 1998 (RRA ’98). Independence from other IRS offices is critical for Appeals to accomplish its mission of resolving tax controversies, without litigation, on a basis that is fair to the taxpayer and the Federal Government. This review was requested by Appeals officials.
The overall independence provided by Appeals’ structure and processes appears to comply with the intent of RRA ’98. TIGTA concluded that:
- Customer Satisfaction Survey results reflect -
- Overall satisfaction improved from 3.36 to 3.60 (on a scale of 1 to 5).
- Fairness in resolving cases improved from 3.27 to 3.48.
- Appeals independence improved from 3.43 to3.70.
- Members of professional organizations believed the independence of Appeals is generally very high.
- Possible ex parte communications were identified in less than 1 percent of the closed case files reviewed for FYs 2003 and 2004.
TIGTA considered some specific concerns and provided their findings:
- Campus Strategies – The shifting of work from field operations to campus operations appears to affect the quality of Appeals decisions due to the reduced number of face-to-face conferences, a campus environment is less conducive to a careful, candid assessment of the case, and taxpayers assigned to Appeals campus sites might perceive they are receiving second-class treatment.
Findings - It was determined that Appeals employees at campus locations receive the same training, oversight, quality review, and automation resources as Appeals employees in field operations. Additionally, historical data establishes that more and more taxpayers/ representatives prefer telephone conferences over the traditional face-to-face conferences due to the time saved in reaching a final resolution of the case. However, Appeals will continue to monitor its overall quality to ensure there is no distinction in the quality of our decisions between the campus and field operations.
- Waiver of Ex Parte Provisions in Fast Track Settlement – The required waiver of the prohibition of ex parte communications between Appeals and Compliance in cases using the Fast Track Settlement process appears to compromise the independence of Appeals. There is an additional concern Appeals may be using these waivers to discuss and develop issues with IRS examination functions and Office of Chief Counsel personnel before starting the mediation process, without providing taxpayers the same opportunity.
Findings – An element of successful mediation is the ability of the mediator to discuss issues with both parties jointly and with each party separately. For taxpayers to receive the benefit of having Appeals Officers as mediators in the Fast Track Settlement Program, the IRS requires them to waive the prohibition on ex parte communications. Tax professionals who have been involved in the process advised TIGTA the ability of the Appeals Officers to discuss the merits and hazards of both parties’ position with each party candidly and separately is essential to the early resolution of the case while it is still under the control of Compliance.
Appeals plans to issue additional guidance to ensure that all Operating Divisions are aware of the types of communications that are permissible prior to the opening mediation conference.
- Compliance’s Coordinated Issue Papers – There is a concern that Appeals automatically follows the direction in Compliance’s Coordinated Issues Papers.
To address this concern, Appeals will revise their Internal Revenue Manual to clarify that Appeals is not bound by the position(s) taken in Compliance’s Coordinated Issues Papers.
- Technical Guidance Coordinators – To address a concern that taxpayers/ representatives are prevented from speaking with the Technical Guidance Coordinator, Appeals will revise their IRM to reflect that such requests will be honored.
- Appeals Settlement Guidelines – Based on recent public announcements, there is a concern that Appeals will revise settlement guidelines more quickly after court cases are decided in favor of the government over court cases decided in favor of a taxpayer.
To address this concern, Appeals will reinforce that section of the Internal Revenue Manual regarding the reconsideration of the appropriate settlement range or position of a coordinated issue based on any new court decision, ruling, or other significant occurrence.