7.40.1  IIR Program (Cont. 1)

7.40.1.3 
IIR Planning and Organization

7.40.1.3.2 
IIR Team and Industry Orientation

7.40.1.3.2.2 
IIR Orientation - Part 2

7.40.1.3.2.2.2  (11-01-2004)
Finalize Plans for the Industry Orientation

  1. The IIR Team Executive will start planning the industry orientation prior to the formal team orientation. The dates and a basic agenda will have already been given to the industry. At the team orientation meeting, the agenda for the industry orientation will be finalized and each team member will be assigned a role for the industry orientation.

7.40.1.3.2.2.3  (11-01-2004)
Develop IIR Issue Work Plan

  1. The IIR Issue Work Plan is a step-by-step plan for the team to work the issue. The Issue Work Plan should be flexible in nature and will change as the issue is developed. The plan should follow the agreed upon timeline.

7.40.1.3.2.3  (11-01-2004)
IIR Industry Orientation

  1. The industry orientation provides an opportunity for the IIR team and industry to build a mutual understanding of each other's interests, objectives, priorities, resources and time constraints.

  2. The IIR team will also begin to identify information/data needs, potential sources and timeframes for obtaining it. Industry orientation participants include:

    • IIR Team Executive (Lead)

    • IIR Team

    • Industry Association or Other IIR Submitter(s)

    • Other Interested Outside Stakeholders

  3. Industry Orientation Agenda will include:

    • IIR process and time frames (See Exhibit 7.40.1-1)

    • IIR Team’s Role

    • Industry's role in the IIR process and an explanation of Federal Advisory Committee Act provisions

    • Meeting minutes and records of meetings with externals

    • External issue resolution proposal(s) as outlined in the application submission documents, suggested by other external stakeholder, e.g., taxpayers, industry and representatives and any differences in the issue that was accepted for the program.

    • Presentation by the submitter and other stakeholders of the issue, factual situations, and explanation of their positions and points of view - facts and law.

    • Fact Finding and Analysis Process

    • Next steps

7.40.1.3.2.3.1  (11-01-2004)
IIR Team's Role

  1. The IIR team’s role is to analyze the issue and to recommend a resolution of the issue. The Associate Chief Counsel representative on the IIR team will serve as the subject matter expert and the primary drafter of proposed published guidance. Published guidance issued under the IIR Program is issued and approved in the same manner as other published guidance.

7.40.1.3.2.3.2  (11-01-2004)
Industry's Role and FACA

  1. The Industry has the following role in the IIR process:

    • Propose industry issues for the IIR program

    • Identify other industry groups that may be impacted or have relevant facts and information relevant to the issue

    • Provide factual information to the IIR team relevant to the issue

    • Provide input during analysis of proposed solution

    • Provide information on data to measure the program's success

    • Communicate resolution to industry taxpayers, clients, etc.

    • Provide feedback for evaluation of IIR

  2. The team should cover some of the frequently asked questions pertaining to the industry roles and participation in the IIR process during the industry orientation. See Exhibit 7.40.1-6.

  3. An overview on FACA and its impact on how the team would interact with external stakeholders should be provided to the industry participants.

7.40.1.3.2.3.3  (11-01-2004)
Maintaining Meeting Minutes

  1. Written meeting minutes will be maintained by the IRS but not distributed to industry representatives. However, Industry representatives may take their own notes and will not be required to share their notes with the Service.

  2. No tape or video recordings of meetings by industry representatives or the Service will be permitted (Rev. Proc. 2003-1 provides an analogous position reference.)

7.40.1.3.2.3.4  (11-01-2004)
Fact Finding and Analysis Process

  1. To enable parties to reach an expeditious conclusion of the Fact Finding phase of IIR, the following should be discussed with the industry at the orientation:

    • Establish an agreed response time for requests for information or documents.

    • Confidential financial or trade secret Information submitted to the team should be designated by the submitter as not to be released under FOIA per 5 U.S.C. 552 (b)(4) exemption at the time of submission. This exemption refers to "trade secrets and commercial or financial information obtained from a person and privileged or confidential." If the information is so designated, the Service is required to give notice to the submitter prior to releasing, 31 C.F.R. 1.6(b), (c), and there would then be an opportunity for the submitter to administratively or judicially block disclosure, 31 C.F.R. 1.6(d), (e).

    • Discuss possible site visits by the IIR team to gather facts on industry operations.

    • Provide feedback on the team's progress and respond to emerging questions or problems about gathering facts (remember FACA guidelines).

    • Coordinate the review of records and/or facilities (e.g., travel requirements and scheduling).

    • Share the Team Work Plan with the Industry.

  2. The analysis of the issue will be conducted independently by the IIR team. The IIR team may discuss their thinking and potential resolutions of the issue in meetings with outside stakeholders but may not discuss or provide proposed published guidance to outside stakeholders. These meetings with outside stakeholders provide the opportunity for receiving outside views and input consistent with the provisions of FACA. However, the team may not enter into negotiations with the industry regarding the resolution of the issue.

7.40.1.3.2.3.5  (11-01-2004)
Next Steps

  1. Conclude the orientation by reviewing process agreements and understandings reached. Identify items to be accomplished before next meeting (including any due dates) and logistical arrangements. Acknowledge the Industry’s efforts to support the IIR program.

7.40.1.4  (11-01-2004)
IIR Fact Finding and Analysis

  1. The Fact Finding and Analysis process begins during the IIR Team and Industry orientation sessions and is expected to last between two to four months. This process consists of gathering, verifying and validating relevant facts and analyzing law while considering the external stakeholders’ facts and positions on the issue. See Exhibit 7.40.1-7, Lessons Learned from Prior Industry Issue Resolution Teams, for tips in conducting fact finding and analysis.

  2. Fact Finding and Analysis are two steps in the process. However, these actions are not completely independent of each other. Some members of the IIR team will still be conducting fact finding while others will start preparing legal analysis based on the facts compiled to date. After these steps are completed, the team will be able to recommend a resolution through published or administrative guidance.

7.40.1.4.1  (11-01-2004)
Fact Finding

  1. The IIR team must "define the issue" to be resolved. Actions to accomplish this may include the following:

    • Review issue description as accepted and proposed by the submitter.

    • Discuss issue with Team members to ensure consensus in understanding of the issue.

    • Discuss with outside stakeholders to gain better understanding of the issue.

    • Explore outside stakeholders' interest in the issue and why the issue is problematic.

    • Identify similar issues in other industries and find out how they are handled.

    • Discuss issue with other industry/trade associations that may be affected by the Issue.

    • Estimate annual revenue impact of the issue (average tax adjustment times number of taxpayers affected).

  2. The IIR team must determine the Service's "examination practices" for the issue. Actions to accomplish this may include the following:

    • Determine the magnitude of the issue and how it is being resolved in examinations.

    • Discuss examination practices with team members.

    • Discuss examination practices with industry submitters and other outside participants.

    • Identify and review existing documents which address the issue (Coordinated Issue Paper, Technical Advice Memorandum, Appeals Settlement Guidelines, etc.).

    • Review the initial screening information gathered.

    • Review CEMIS Database and other issue management systems

    • Survey audit teams/groups and other IRS personnel (Appeals/Counsel) to determine who is currently involved with the issue.

    • Discuss with audit teams or examiners currently working the issue.

    • Discuss with other IRS personnel (Appeals / Counsel).

    • Estimate time/dollars spent examining the issue.

  3. The IIR team must determine "industry practices" for the issue. Actions to accomplish this may include the following:

    • Study the industry accounting procedures and methods, computer files, commercial framework, tax return preparation methodology, standard industry practices, language and terminology.

    • Ask industry how they are treating the issue for tax purposes.

    • Ask industry how they are treating the issue for book purposes ( GAAP).

    • Ask industry how and what records are being maintained.

    • Research written sources (AICPA articles, etc.) and web sites for information on industry practices.

    • Research what accounting association (AICPA, etc.) guidance there is on the issue.

    • Ask industry and examiners if the issue involves a transaction that is being marketed by external parties.

    • Attend presentations regarding industry techniques, problems and economic factors that impact on tax considerations.

    • Contact other sources (university professors, outside experts, etc.) for information regarding industry practices.

    • Meet with other related groups within the industry.

  4. The IIR team will "develop the facts" surrounding the issue. Actions to accomplish this may include the following:

    • Identify types and number of businesses and other taxpayers affected.

    • Discuss the known facts gathered with team members.

    • Discuss the facts in the submission or industry presentation with industry representatives.

    • Identify method (request to submitter, survey, etc.) for obtaining additional information.

    • Identity and obtain information/internal experts needed to determine facts.

    • Identify and obtain outside expertise is needed to validate facts.

    • Conduct site visits, as needed to see issue first hand, and interview appropriate parties to ensure all facts and activities are identified and validated.

  5. When conducting surveys to gather facts the following rules must be followed:

    1. Internal - Survey of bargaining unit employees must be sent to NTEU in advance per National Agreement Article 8, Section 8A.

    2. External - The Paperwork Reduction Act requires all government agencies to obtain OMB approval for activities involving more than nine taxpayers on the same topic. This would not preclude external stakeholders from gathering data from their own members to present during the IIR process.

7.40.1.4.2  (11-01-2004)
Analysis

  1. The IIR team will research the tax law and court decisions pertaining to the issue. Actions to accomplish this may include the following:

    • Review legal analysis provided by industry.

    • Identify tax law to be reviewed.

    • Research law and court cases.

    • Identify pending litigation.

    • Discuss with team members.

    • Discuss with other subject matter experts in LMSB, SB/SE, Chief Counsel, Appeals and Justice, as appropriate.

    • Discuss with Industry.

  2. The IIR team will determine "status of pending legislation" impacting the issue. Actions to accomplish this may include the following:

    • Discuss with team members and industry.

    • Ask Team members and Industry to keep each other informed of any legislation updates.

    • Ask Associate Chief Counsel representative on the Team to follow-up internally on any pending legislation.

    • Review the Thomas web site (http://thomas.loc.gov/ ) periodically to determine if there is any legislative activity.

  3. The IIR team will review change in accounting methods law and procedures. Actions to accomplish this may include the following:

    • Review prior IIR guidance on change in accounting provisions.

    • Review Change of Accounting Method (CAM) administrative guidance [e.g. current revenue procedures for Voluntary Method Changes, Automatic Method Changes, Involuntary Method Changes].

    • Discuss with CAM Technical Advisor(s).

    • Discuss with team members and industry.

7.40.1.5  (11-01-2004)
IIR Teams Reaching Agreement on Resolution

  1. All team members should participate in the recommendation of guidance to resolve the issues. In general, an in-person meeting should take place with all members present. If possible, a facilitator should also be present to assist in resolving disagreements among team members. The goal is to have IIR team consensus on the recommended resolution. However, if a consensus cannot be reached all minority positions should be discussed in the briefing paper.

7.40.1.5.1  (11-01-2004)
IIR Published Guidance

  1. IIR team resolution analysis should start with deciding on whether a Revenue Procedure or another form of published guidance is the appropriate vehicle for communicating the guidance. The team should also decide if supplemental internal guidance is warranted.

  2. Next, the team should discuss and agree on the recommended technical position and guidance needed. The team discussion and recommendations should address the following:

    1. Whether the proposed guidance impacts other taxpayers, IRS Business Operating Divisions, and other government agencies. If so, what coordination/actions will be necessary or can the scope be narrowed?

    2. Whether the proposed guidance impacts other guidance. If so, will the published guidance need to be revised or revoked? Will internal guidance need to be revised or de-coordinated?

    3. Whether a safe harbor provision is warranted, feasible, and likely to be adopted by industry.

    4. Whether guidance will be retroactive or prospective. If prospective, whether audit protection should be given.

    5. If applicable, how should Change of Accounting method provision be handled.

  3. Prior to drafting published legal guidance, a briefing should be conducted (either individually or as a Team) with Chief Counsel, Treasury, LMSB and SB/SE leadership on the technical position and/or safe harbor being recommended.

  4. If no major concerns are raised, the IIR team will prepare the guidance package consisting of a briefing paper, proposed published guidance, and any proposed administrative guidance. The Associate Chief Counsel subject matter expert is the primary drafter of the proposed published guidance with assistance from the team. Drafts disseminated in hard copy or by email to any Service employee either outside or within the IIR team should be marked " Draft" and contain the following language: "This document includes statements subject to privilege. This document should not be disclosed to anyone. You are hereby notified that any disclosure, copying, or distribution, or the taking of any action in reliance on the contents of this information is strictly prohibited. The positions set forth in this document should not be interpreted as official positions of the IRS."

  5. The contents of the "Briefing Paper" should include the following:

    • Background Information -IIR Issue, IIR process and Industry practice

    • Industry Impact

    • General discussion on the legal analysis

    • Teams recommendation and deliberation

    • Any, alternative positions and minority positions

    • Industry recommendation

    • Comparison of Team’s and Industry's suggested resolution

    • How the issue is treated for book purposes

    • Compliance considerations and record keeping requirements

    • Impact on other taxpayers, IRS business operating divisions, and other government agencies

    • Impact on other guidance

    • Assessment of the industry’s adoption of any safe harbor provision(s).

  6. The proposed published guidance must be prepared in accordance with all procedural requirements and submitted for review and clearance through the Associate Chief Counsel with primary subject matter jurisdiction. The guidance should be ready to go forward for formal clearance when completed and reviewed by the team. Drafts may be freely shared among team members. Drafts do not constitute Chief Counsel Advice for the purposes of IRC section 6110(i).

  7. Drafts of the published guidance can be shared with other Service personnel, with Team Executive approval, if their input is helpful in the development of the guidance product, and providing a copy of the draft is the most effective manner of obtaining that input. The IIR team should ensure that the copies of draft documents shared for this purpose are returned to the team or destroyed by the recipient.

  8. If the team decides that administrative guidance is needed, the guidance should be drafted and released at the same time or shortly after the published guidance is issued. Internal guidance may include:

    • Compliance strategy or position for dealing with taxpayers who may not follow the Resolution.

    • Examination techniques or audit steps for future audits.

7.40.1.5.2  (11-01-2004)
IIR Administrative Guidance

  1. The team should review the proposed administrative guidance and its impact to determine:

    • What coordination/clearance will be necessary with other impacted IRS Business Operating Divisions/Offices.

    • What other internal guidance will need to be revised or de-coordinated and assign responsibility for it.

    • Whether the administrative guidance resolves the issue or whether published guidance project should be proposed.

  2. A briefing should be conducted (either individually or as a team) with LMSB and/or SB/SE issue owner on the proposed guidance and other recommendations. If no concerns are raised, the IIR team will draft the guidance package consisting of a briefing paper and the proposed administrative guidance. The briefing paper will include recommendations as to whether additional published guidance will be necessary.

7.40.1.6  (11-01-2004)
IIR Approval, Communications, and Evaluation

  1. This is the final stage in the IIR process. At this point, approval and communication activities should be occurring simultaneously. Guidance packages will be placed in formal clearance, briefings will occur, and communication strategies developed. After guidance is published and communicated, feedback will be requested from each team for the IIR process evaluation.

7.40.1.6.1  (11-01-2004)
Approval of IIR Team Recommendations

  1. Once the IIR team's guidance package has been prepared, each team member will review and indicate approval by initialing a cover sheet containing the information shown in Exhibit 7.40.1-8. The guidance package should include a copy of the cover sheet, briefing paper and proposed guidance. A copy of the guidance package is placed in the team binder. The approval process will start with the IIR issue owner. At any point in the approval process, the draft document may be returned to the team for additional work.

7.40.1.6.1.1  (11-01-2004)
Issue Owner Approval

  1. The IIR Team Executive will present the guidance package to the IIR Issue Owner for approval. The presentation will include a briefing by the IIR team of the team's findings and recommendation. Joint or separate briefings will be held if requested for other IRS executives (SB/SE, LMSB, Division Counsel or Appeals) impacted. The functional team member will coordinate their attendance/briefing. The date of the submission and approval of the IIR Issue Owner will be noted on the sign-off sheet and placed in the issue binder.

  2. Copies of the signed guidance package will be provided to PFTS by the IIR team Manager. The Issue Owner is responsible for briefing LMSB Strategy Compliance Council of the team's status, recommendations, and any controversial issues that may arise.

7.40.1.6.1.2  (11-01-2004)
Briefing Outside Stakeholders

  1. Once the Industry Director or SB/SE Issue Owner has approved the team's guidance recommendation, the IIR team may meet with the outside stakeholders who participated in the process. No documents will be shared with the outside stakeholders at the meeting, but the IIR team should outline the proposed recommended resolution, explaining the rationale for the proposed recommended resolution. The IIR team must clearly state that the proposed recommended resolution is not Service position, and that, if the proposed recommended resolution leads to published guidance, the published guidance will be prepared and approved (and may be changed) in the same manner as other published guidance.

7.40.1.6.1.3  (11-01-2004)
Published Guidance Clearance

  1. The Associate Chief Counsel team member, upon notification of the business operating division’s approval, will begin the formal clearance process for the guidance. Normal clearance procedures for published guidance will be followed during the review by Chief Counsel, IRS Commissioner, and Treasury.

  2. The IIR Team Executive may follow-up with Counsel and Treasury to find out what stage of clearance the proposed guidance is in. If problems or questions arise, the IIR team should participate in any necessary briefings (either in-person or by conference call) to resolve the issue.

  3. Upon receiving Treasury approval, the Associate Chief Counsel attorney will coordinate the release of the guidance with IIR Team Manager and LMSB Counsel.

7.40.1.6.1.4  (11-01-2004)
Administrative Guidance Clearance

  1. A team member(s) should be assigned responsibility for clearing administrative guidance (audit guidelines/directives). Normal clearance procedures should be followed based on the type of guidance being issued. See IRM 4.51.2.6.2 for LMSB Directives. If issued on interim guidance basis via memorandum, the Issue Owner is responsible for insuring that the guidance is later incorporated into the IRM or other published document (ATG, etc.).

7.40.1.6.2  (11-01-2004)
Communication of IIR Guidance

  1. Once the guidance package has been prepared, the team should begin developing communication strategies to ensure that all external participants are timely informed and internal and external outreach plans are developed to communicate the guidance to those impacted.

7.40.1.6.2.1  (11-01-2004)
Notification of Issue Submitters and Other External Participants

  1. Published Guidance - IIR participants are notified of the publication of guidance at same time the guidance is released to the press. The Associate Chief Counsel representative will coordinate the timing of this event with Division Counsel and the IIR team.

  2. Administrative Guidance – IIR team will notify the IIR participants when the Administrative Guidance has been posted to the IRS Digital Daily.

  3. After the guidance has been released, the IIR team should meet with the issue submitters and other interested parties to brief them on the contents of the guidance and gather feedback on the IIR process. This could be done in person or through conference calls.

7.40.1.6.2.2  (11-01-2004)
Communications Plan

  1. Each IIR Team Executive is responsible for the development of a "Communications Plan" to announce the IIR resolution guidance. The IIR team will draft the communications products with the assistance of the Industry or SB/SE Communication Specialist. Communications product drafting should start no later than when the proposed guidance has been submitted for clearance.

  2. The IIR Team should keep the functional Communication Specialists abreast of the development of the proposed resolution to ensure timely communication planning, product development and coordination of communication activity for their respective internal and external audiences. The functional Communications Specialist will coordinate the clearance of the communications documents with PFTS.

  3. The announcement of administrative guidance should be coordinated with the release of the published guidance associated with it.

7.40.1.6.2.2.1  (11-01-2004)
Internal Communications

  1. Internal Communications may include the following communication products and activities:

    • Posting the resolution guidance documents, press release and talking points to the IIR Intranet site.

    • E-mail message to all impacted employees.

    • VMS from the Executive Owner (or other designated executive) to all affected division employees.

    • Employee newsletter article (e.g. LMSB Newslink, Technical Advisors News Letters, etc.) linking to the IIR Intranet site.

    • Managers should ensure that team members/examiners are aware of IIR Resolution positions that affect their cases.

7.40.1.6.2.2.2  (11-01-2004)
External Communications

  1. External Communications - types of communication formats may include:

    • Posting of resolution guidance documents to www.irs.gov .

    • Press Release to announce issuance of published guidance (to be coordinated with IRS Media Relations).

    • Talking Points for executives to use in stakeholders meetings (with Power Point if needed).

    • News Service items for practitioners and other stakeholders.

    • Other outreach documents to assist stakeholders in communicating the guidance to their members/clients.

7.40.1.6.3  (11-01-2004)
Questions from Internal and External Stakeholders

  1. Internal and external stakeholders with questions concerning IIR published guidance should direct their questions to the Associate Chief Counsel office responsible for the subject matter addressed in the published guidance. A business operating division contact should be assigned to answer questions on IIR administrative guidance issued (e.g. audit guidelines).

7.40.1.6.4  (11-01-2004)
IIR Program Evaluation and Measures of Success

  1. The IIR program is evaluated using both quantitative and qualitative data to determine if the program successfully met its goals. PFTS collects quantitative information on time-line performance and resource expenditures throughout the issue resolution process. Other quantitative data and qualitative information is gathered from the team at the end of the process. Using the IIR data captured, the IIR Program will be evaluated annually to measure the program effectiveness and determine if process improvements are needed.

7.40.1.6.4.1  (11-01-2004)
IIR Evaluation Data

  1. Each IIR Team member will assist PFTS in evaluating and measuring the success of the IIR program by accurately keeping records of:

    • communications

    • staff hours

    • travel

    • other costs

  2. Each team will provide estimates of:

    • number of returns examined and time spent examining issue on an annual basis (historically),

    • number of taxpayers impacted by published guidance,

    • time and resources saved by taxpayers (record keeping, tax preparation, etc.) as a result of guidance.

  3. Each team will also comment on how adoption of guidance by outside stakeholders can be tracked in the future.

  4. Information (1) above should be included in the monthly status report as they occur. The final team status report should include the evaluation data in (2) and (3) above.

7.40.1.6.4.2  (11-01-2004)
IIR End of Issue Questionnaire

  1. After guidance is published, all IIR team members (including ad hoc members) and external participants will be asked to evaluate the IIR program by completing the Industry Issue Resolution End of Issue Questionnaire. Responses to the IIR questionnaires will be used to measure customer satisfaction, employee satisfaction and business results.

Exhibit 7.40.1-1  (11-01-2004)
Industry Issue Resolution Process

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Exhibit 7.40.1-2  (11-01-2004)
IIR Roles and Responsibilities

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Exhibit 7.40.1-3  (11-01-2004)
NTEU Letter of Understanding

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Exhibit 7.40.1-4  (11-01-2004)
IIR Team Status - IIR Data Collection and Reporting System

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Exhibit 7.40.1-5  (11-01-2004)
Federal Advisory Committee Act

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Exhibit 7.40.1-6  (11-01-2004)
Interacting with Outside Stakeholders - Frequently Asked Questions

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Exhibit 7.40.1-7  (11-01-2004)
Lessons Learned from Prior Industry Issue Resolution Teams

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Exhibit 7.40.1-8  (11-01-2004)
IIR Teams Recommended Proposal

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