Appeals develops settlement guidelines when an issue is coordinated by LMSB (see LMSB procedures in IRM 4.40.2, Technical Advisor Program - Program Responsibilities and Duties). These issues along with the Appeals Technical Guidance Coordinators are listed on the Appeals Web site at http://appeals.web.irs.gov/ispaci/ispcoord.htm. For the public, they are also listed at www.irs.gov/appeals .

Once Compliance issues a Coordinated Issue Paper (CIP), if the issue is not already an Appeals Coordinated Issue (ACI), the TGC prepares a memo designating the issue as a Compliance Coordinated Issue (CCI) in Appeals. See Exhibit 8.7.3-4. Effective with the date of the issuance of the CIP, the AO must get the review and concurrence of the Appeals TGC before discussing the settlement with the taxpayer. The CIP is used as a resource which explains the legal position of the government, however, Appeals is not required to follow it. In determining the appropriate settlement, the AO and TGC consider the taxpayer’s position and make an independent assessment of the litigating hazards based on all available information.

The procedures outlined in IRM 1.4.28.9, Referrals to Appeals Technical Guidance, and IRM 8.2.1.6 , Appeals Officer’s Preliminary Review of Case, require Appeals Officers to refer all cases containing coordinated issues to Technical Guidance.

Based on workload and scheduling, the Coordinator may be assigned as a team member or a consultant on the case. The Coordinator’s review and concurrence of the settlement of the Compliance Coordinated Issue is always required if Compliance has issued a CIP, whether or not there is an approved Appeals Settlement Guideline (ASG).

Issues are de-coordinated with the approval of the Director, Technical Services. Factors considered are the de-coordination by Compliance or a prolonged period of inactivity in Appeals.

An ACI is an issue or category of case with Servicewide impact or importance, requiring coordination to ensure uniformity and consistency nationwide.

The primary coordinator prepares a memo to designate the issue as an ACI and then forwards it for approval through his/her Appeals Team Manager (ATM). The Director, Technical Guidance recommends an issue for coordination to the Director, Technical Services who is the approving official. See Exhibit 8.7.3-3.

A particular issue or a category of case is designated ACI because it generally involves persons or entities distributed over a wide geographic area and/or is common to:

The ACI program encompasses any of the following:

Appeals coordinates an issue in all industries in which the issue appears even though Compliance may coordinate it in only one industry. Generally, the Technical Guidance Coordinator for the industry or specialty area in which the issue is coordinated by Compliance is the primary Coordinator and has review and concurrence responsibility on the issue. The primary Coordinator consults with other TGCs who also have the issue in their industry or specialty area.

The procedures outlined in IRM 1.4.28.9 and IRM 8.2.1.6 require the AOs to refer all cases containing coordinated issues to Technical Guidance. For ACI this includes both issues and category of case designations.

Based on the Technical Guidance Coordinator’s workload and scheduling, the Coordinator may be assigned as a team member or a consultant on the case. The AO must get review and concurrence from the Coordinator on all legal and factual ACI issues prior to discussing the settlement with the taxpayer. (Review and concurrence is not required on a Category of Case, although a referral is still required.)

At a minimum the Coordinator for the industry or specialty area for an ACI category of case provides the Appeals Officer an information package, so the AO can gain insight into the issue, industry, or specialty area (before holding a conference, if possible.)

The Appeals Coordinated Issues along with the TGCs are listed on the Appeals Web site at http://www.appealsvideos.net/appeals/TGIssues/query.asp. For the public they are listed at www.irs.gov/appeals .

An Emerging Issue is an issue that surfaced in an industry or specialty area in a number of Appeals cases or it is understood cases will be coming to Appeals in the near future with the issue. The issue is not coordinated but may be in the proposed stage for coordination; however, in the judgment of the Coordinator, there is a current need to address some of the key aspects of the issue with Appeals Officers to assist them in the early stages of consideration of the issue and to promote consistency in the treatment of the issue in Appeals.

Upon identifying possible Emerging Issues within their industry and specialty areas, TGCs discuss the issues with their Appeals Team Manager (ATM).

If the ATM concurs with the recommendation for designation, the Coordinator forwards a memorandum for the signature of the Director, Technical Services through the Director, Technical Guidance designating it as an Emerging Issue.

IRM 1.4.28.9 and IRM 8.2.1.6 require AOs to refer all cases containing issues listed on the Appeals Emerging Issue list to Technical Guidance.

Based on workload and scheduling, the Technical Guidance Coordinator may be assigned as a team member or a consultant on the case. At a minimum the Coordinator for the industry or specialty area provides the AO an information package, so the AO can gain insight into the issue, industry or specialty area (before holding a conference, if possible).

The Appeals List of Emerging Issues is also listed on the Appeals Web site at Technical Guidance Issue Locator - http://www.appealsvideos.net/appeals/TGIssues/query.asp. For the public they are listed at www.irs.gov/appeals.

The Technical Guidance Coordinator (TGC) develops ASGs for CCIs and ACIs (except category of case issues). The settlement guidelines are structured as outlined in the exhibit. ( See Exhibit 8.7.3-1. ) A signature page is also included as shown in the exhibit. ( See Exhibit 8.7.3-2.) The TGC completes a draft ASG after obtaining an understanding of both the government's position and the taxpayer's position. Typically, this requires an analysis of actual cases inclusive of consideration both parties' written and/or oral presentations.

Coordinators submit draft ASGs through their ATM to the Director, Technical Guidance (or his/her designee, e.g., Technical Advisor/Program Analyst) for comment. Following review the ASG is concurrently forwarded for review and comment to -

The Coordinator, working in collaboration with his/her ATM and the Director, Technical Guidance (or designee), considers any comments received from Appeals and Chief Counsel's office, and if necessary revises the draft ASG and submits it through their ATM to the Director, Technical Guidance Office for review. If there are significant and material differences between Counsel's recommendations and Appeals revision, the ASG is sent to Counsel for a second 90 day review period. This is the final review by Counsel.

The Coordinator, working in collaboration with his/her ATM and the Director, Technical Guidance (or designee), finalizes the ASG.

The Director, Technical Guidance recommends the Appeals Settlement Guidelines for approval to the Director, Technical Services who is the approving official.

Revised Appeals Settlement Guidelines are generally required to be written within three months of any new court decision, ruling, or other occurrence significant enough to change the appropriate settlement range or position for that issue, regardless of whether the decision is favorable or unfavorable to the government. With respect to new court decisions, the start of the three months may be postponed to see if the decision is appealed, an Action of Decision is issued, or some other event occurs that might affect the weight the decision is given when reconsidering the appropriate settlement range.

The Director, Technical Services may waive the ASG requirement for reasons such as, but not limited to, the limited number of cases or the establishment of a settlement position involving a full sustention or full concession of the issue.

Appeals Settlement Guidelines are available only to IRS personnel who have a need to know, e.g.

Distribute unredacted copies only to authorized persons (on a need to know basis.) This document must be marked for official use only.

Do not give the guidelines (drafts or finals) to taxpayers or their representatives. Taxpayers may make a request for the final ASG under the Freedom of Information Act (FOIA) (See IRM 11.3.13) since portions of the guidelines are exempt from disclosure. Also redacted copies are now available as part of the FOIA reading room and can be found under the Appeals section of the www.irs.gov/appeals Web site.

When contacted by an AO/ATCL either through the referral process or other contact, the Technical Guidance Coordinator -

Upon initial review of a case, review the Lists of Compliance Coordinated Issues ( http://appeals.web.irs.gov/ispaci/ispcoord.htm) and Appeals Coordinated Issues ( http://appeals.web.irs.gov/ispaci/apcoordissues.htm) on the Appeals web site.

Before scheduling the initial conference on the coordinated issue make a referral to Technical Guidance following the procedures contained in IRM 1.4.28.9 and IRM 8.2.1.6.

Advise the taxpayer the issue is coordinated and any settlement of the issue requires the review and concurrence of the TGC.

Forward a rough draft of the Appeals Case Memo (ACM) (and any related documents requested by the TGC such as copies of documents, RAR, protest, closing agreements, etc.) to the TGC, whether the TGC is a team member or not. The TGC may waive this requirement after discussing the issue with the AO.

Obtain the TGC's tentative approval of the settlement proposal and/or settlement range before any settlement options are discussed with the taxpayer.

Send the TGC a copy of the portion of the final ACM and Closing Agreement, if any, which discusses the coordinated issue.

When closing the case, note on the Form 5402 that the TGC concurs with the proposed disposition of the coordinated issue.

If the TGC does not concur with the proposed disposition of the coordinated issue, attach a copy of the TGC's memorandum (rebuttal) to the Appeals Case Memorandum. See IRM 8.7.3.4.1. for procedures on how to resolve the dispute.

If the coordinated issue is designated for litigation in a specific case by the Office of Chief Counsel do not consider settlement of that issue in the designated case.

Delegation Order 4-25 allows designated Compliance managers to settle coordinated issues at the Compliance level when Appeals Settlement Guidelines or Appeals Settlement Positions (or settlement ranges) are approved by the Director, Technical Services.

See IRM 1.2.43.6 for text of DO 4-25.

In the case of an approved settlement of a coordinated Compliance or Appeals issue where the result is"Contrary to Service Position " and the settlement is a full concession without offsetting consideration, the procedures described in IRM 8.6.3.5.2 apply in accordance with the following.

When preparing Form 4368, Transmittal to National Office Appeals follow these steps:

If the approved settlement is at the Compliance level under Delegation Order 4-25 (as revised),

To meet the two-pronged requirement that all decision-makers are available for the Fast Track Session and that CCI and ACI are subject to the review and concurrence of the Appeals Technical Guidance Coordinator, the Appeals Technical Guidance Coordinator normally participates in the Fast Track Session with the taxpayer and Compliance. Where the Appeals Technical Guidance Coordinator is unable to attend the Fast Track Session meeting, the Appeals Technical Guidance Coordinator is available by phone to discuss review and concurrence.

If, for whatever reason, the Appeals Technical Guidance Coordinator is not part of the Fast Track Appeals Team, settlement of the CCI/ACI issue remains subject to the review and concurrence of the Appeals Technical Guidance Coordinator. Before executing a Fast Track Session Report that includes CCI/ACI issues, the Appeals Officer obtains the concurrence of the Appeals Technical Guidance Coordinator.

If there is a disagreement between the Appeals Technical Guidance Coordinator and the Appeals Officer/ATCL on how to settle the issue, resolution procedures follow IRM 8.7.3.4.

The Service has set up a number of cross-functional Issue Management Teams (IMTs) to provide direction to the field as quickly as possible about potentially significant or strategically important issues identified by LMSB (such as Tier I and Tier II issues) and in response to Abusive Tax Avoidance Transactions (ATATs).

Appeals established groups of coordinators within Technical Guidance who serve as the focal point for activities involving IMTs, providing continual advice, guidance and assistance to Appeals Management, and Appeals Officers.

TGCs assigned IMTs for ATATs must be familiar with the provisions of IRM 4.32.1 through 4.32.3, the "Process Guide for Combating Abusive Tax Avoidance Transactions." It describes the examining process for ATATs, contains procedures to use in the coordination of ATATs, and describes the roles of these cross-functional units.

TGCs assigned to IMTs for LMSB issues must also be familiar with IRM 4.51.6, "Issue Management Process Guide."

The TGC’s primary responsibility on an IMT or ATAT team is to evaluate the litigating hazards. The Revenue Reconciliation Act of 1998 provides that Appeals is responsible for the independent assessment of the litigating hazards with respect to particular tax issues. Technical Guidance Coordinators recommend settlements only after completion of the following actions:

In addition to hearing cases (traditional or ADR processes), Appeals consideration of the position(s) of affected taxpayers may be accomplished using various approaches, including but not limited to:

Technical Guidance Coordinators and Appeals Officers follow the procedures listed above for Compliance Coordinated Issues, Appeals Coordinated Issues and Emerging issues, including the referral procedures at IRM 8.2.1.6(2).

Any settlement devised by Appeals must have a basis in the law and be based upon the hazards of litigation. Settlement offers not considered to be based on hazards or have a basis in the law include:

If deductions for transaction fees and other out-of-pocket expenditures are a component of a settlement, the overall settlement are based upon the hazards of litigation inherent in the issue.

Appeals is not precluded from offering the terms of settlement initiatives authorized by the Commissioner that fall outside these guidelines.

Penalties related to ATAT issues are coordinated along with the related issue.

Settlements must be based on the merits of the penalty issue standing alone. Legal hazards inherent in the penalty as well as facts specific to the taxpayer, including reasonable cause and good faith factors, ares considered in the settlement of penalties. Exercise care to fully explain the settlement in the supporting statement.

The Technical Guidance Coordinator determines which agreement forms are appropriate for any coordinated issue.

Because finality is encouraged in the settlement of coordinated issues, it is recommended Form 870-AD be used.

Closing Agreements are especially encouraged in cases in which the settlement provides taxpayers with material tax advantages in years not before Appeals. Form 906, Closing Agreement on Final Determination Covering Specific Matters is used.

Announcement 2006-100 states that effective 12/04/2006 the Operating Divisions issue all statutory notices of deficiency or other determination notices (including statutory notices of claim disallowance or FPAA/FSAA, but not including notices of determination on Collection Due Process cases) triggering litigation rights on non-docketed cases involving an unagreed listed transaction. Listed transactions are defined under Treas. Reg.1.6011-4.

The "LT" feature code is input on all cases in Appeals inventory containing at least one listed transaction. A list of listed transactions is posted to the Appeals Technical Guidance web site, and can also be found at http://lmsb.irs.gov/hq/pftg/otsa/Listed_Transactions_List.asp.

Appeals Officers conducts settlement negotiations in accordance with established procedures, inclusive of applicable coordinated issue (CCI, ACI and Emerging Issues) procedures set forth in IRM 8.7.3. Generally, the majority of cases are settled in Appeals jurisdiction but when a listed transaction cannot be settled, special procedures apply.

Once Appeals determines settlement is not possible, the Appeals Officer informs the taxpayer the case is being closed in Appeals and returned to the Operating Division in accordance with Announcement 2006-100. Returning the case to the Operating Division is done after efforts to resolve the case, including post-Appeals mediation, if appropriate, are completed.

The Appeals Officer continues to prepare statutory notice language, the Appeals Case Memorandum (ACM) and also shares any computational work that is complete with Compliance (such as RAR computational review of Coordinated Industry Cases or computations prepared in processing partial agreements).

Related issues (employment tax, plan qualifications, tax exempt status determinations and penalties) are considered by the AO and handled according to Appeals’ existing procedures. If agreement is not possible, the issue is returned along with the listed transaction issue to Compliance for processing and issuance of appropriate notices or letters.

In cases where the listed transaction is settled, but the related penalty is unagreed, (after Post Appeals Mediation is offered), Appeals closes the settled transaction agreed, with a Form 906 Specific Matters Closing Agreement, and prepares the ACM and the notice language for the related penalty. The case is closed to APS so it can be returned to Compliance for issuance of the appropriate notice.

Until programming of the Form 5402 is changed, Appeals Officers will manually add this identification on Form 5402: "Unsettled Listed Transaction Case – Transfer to the Originating Function for issuance of statutory notice" .

A thorough discussion of the Competent Authority and the Mutual Agreement Procedure (MAP) are found at IRM 4.60.3. Rev. Proc. 2006-54 contains the procedures for taxpayers seeking Competent Authority assistance. Section 8 of Rev Proc 2006-54 describes the Simultaneous Appeals Competent Authority procedure.

Taxpayers who do not agree with the correctness of an allocation adjustment may pursue their right of an administrative appeal before requesting Competent Authority consideration, or request the Simultaneous Appeal procedure.

See IRM 8.7.3.7.2, Potential Competent Authority Cases, for information concerning Appeals procedures, responsibilities and authority when the taxpayer is seeking a resolution of the issue in Appeals prior to requesting Competent Authority consideration.

A taxpayer may file a MAP request for Competent Authority consideration any time during the U.S. tax determination process.

If the request is filed while the case is still under examination, Compliance continues to work on all issues not covered by the request. When issues are raised which are not under Competent Authority consideration and the taxpayer is not in agreement, Compliance proceeds with the case and issues a 30-day letter. In protesting the unagreed issues, the taxpayer does not need to address any unagreed issue under consideration by the Competent Authority. Following the receipt of the taxpayer’s protest, Appeals procedures are initiated with respect to all unagreed issues not under Competent Authority consideration.

When a request for Competent Authority consideration is filed while a case is in Appeals, the Appeals Officer suspends settlement discussions on the subject issue and forwards the MAP request to the Compliance Area Director, Attn: Program Manager (International). Appeals attaches the following to the request:

The following guidelines are followed for handling Appeals cases with potential Competent Authority issues.

When a potential Competent Authority issue is present in a case, additional care must be given when preparing the Appeals Case Memo (ACM). The special features section of the Form 5402, Appeals Transmittal and Case Memo, is used to indicate a potential Competent Authority issue is present in a case. This feature is marked "X" regardless of how Appeals resolves the issue (i.e., unagreed, partial settlement or full concession by either the taxpayer or government).

When drafting an ACM describing the proposed settlement of a potential Competent Authority issue, the Appeals Officer must bear in mind this document may be used by the Director, International in negotiating the resulting double taxation with treaty partner countries. Accordingly, the ACM must provide as much information as possible concerning the Appeals Officer’s reasoning, which led to the proposed settlement. Explain in full the rationale and weight given to the various factors resulting in a partial or full concession by the government. This information enables the Competent Authority at some later date to assure taxpayers do not abuse the Appeals and Competent Authority functions by gaining additional reductions in tax from the Competent Authority for the same factors considered by Appeals.

A Form 870-AD"Offer to Waive Restrictions on Assessment and Collection of Deficiency in Tax and Accept Overassessment" is used to obtain an agreement on a potential Competent Authority issue. A modification of the agreement form for settlement with reservations is required. See IRC 8.6.4.4.2, Modification of Agreement for Settlements With Reservations, for suggested language).

This section discusses the Appeals Technical Procedures and Guidelines for Appeals Review Panels under the Canada-United States Income Tax Convention (1980) as amended from time to time (referred to as "Convention " ). The Technical Procedures and Guidelines are used by Appeals personnel.

The United States Competent Authority (CA) assists taxpayers with respect to matters covered in the Mutual Agreement Procedure (MAP) provisions of tax treaties.

The Canadian and United States CAs agreed to establish principles, guidelines, and procedures to resolve disagreements in respect of the underlying facts and circumstances in cases referred to under the MAP article of the Convention.

The CAs established the binding procedures to determine the underlying facts and circumstances of a specific MAP case where factual disagreements persist. The procedures involve the Appeals organizations of Canada Revenue Agency (CRA) and the United States Internal Revenue Service (IRS), respectively.

The expectation is Appeals Review Panels will be requested by the CAs to determine underlying facts and circumstances in Competent Authority, Advance Pricing Agreement, and simultaneous Appeals and Competent Authority cases.

To ensure uniform nationwide treatment of complex issues relating to pricing and shipment of foreign produced crude oil and by-products, the LMSB Director, Natural Resources and Construction, under Delegation Order No. 153 (as revised) found at IRM 1.43.28, has the sole authority to:

Each Appeals office has jurisdiction of protested cases but with authority restricted by the LMSB Director, Natural Resources and Construction, determination on the controlled issues, namely:

When controlled issues or issues directly related to the controlled issues are protested, the Appeals office forwards a copy of the written protest, together with all supporting material, to the LMSB Director, Natural Resources and Construction for evaluation. The AO advises the taxpayer the protest relating to controlled issues was forwarded to the LMSB Director for their position on the taxpayer's controlled issues.

The Director, Natural Resources and Construction generally grant the taxpayer a conference to discuss the protest and the Service's proposed position on the disputed issue. This conference, if held, constitutes the one level of administrative appeal on the controlled issue(s) described in Delegation Order No.153 (as revised).

After careful consideration of all information, arguments, and other material, LMSB Director, Natural Resources and Construction advises Appeals of his or her determination on the controlled issues by preparing a deposition memo.