8.7.3  Domestic and International Operations Programs

Manual Transmittal

September 26, 2012

Purpose

(1) This transmits revised IRM 8.7.3, Technical and Procedural Guidelines, Domestic and International Operations Programs.

Material Changes

(1) Made several editorial updates to IRM 8.7.3:

  1. Corrected the Appeals Coordinated Issue feature code in IRM 8.7.3.1 (2).

  2. Changed Large and Mid-Sized Business (LMSB) to Large Business and International (LB&I).

  3. Changed Technical Guidance to Domestic Operations.

  4. Changed International to International Operations.

  5. Changed Coordinator to Technical Specialist.

(2) Restated IRM 8.7.3.6.1 to update Appeals role on Issue Management Teams.

(3) Added new IRM 8.7.3.2.4 describing the factors for designating issues as Appeals Coordinated Issues or Emerging Issues.

(4) Removed IRM 8.7.3.8.1, Foreign Produced Crude Oil.

Effect on Other Documents

IRM 8.7.3 dated October 12, 2010 is superseded.

Audience

Appeals Employees

Effective Date

(10-01-2012)


Kirsten Wielobob
Director, Specialty Operations

8.7.3.1  (10-01-2012)
Overview of Appeals Domestic and International Operations

  1. The Appeals Domestic and International Operations ensures nationwide uniform and consistent settlement of issues, enhances the identification and timely resolution of issues, and provides coordination for technical issues.

  2. The following issues are referred to Domestic and/or International Operations. The Feature Code input on ACDS is indicated after each issue. Domestic and International Operations Programs have parallel roles and responsibilities except in few areas as noted throughout this IRM. If the Feature Code is not in the ACDS case record, it will be input by the Appeals Officer when the referral is made.

    1. Compliance Coordinated Issues (IS)

    2. Appeals Coordinated Issues (AI)

    3. Appeals Emerging Issues (EM)

    4. Abusive Tax Avoidance Transactions (LT)

  3. The Appeals International Program provides coordination and expertise to Appeals Management and Appeals Officers (AOs) for International issues and economist issues.

    1. The above coordinated International issues also need the Feature Code "IC" (International Case) input on ACDS

    2. The definition of International Issues, including coordinated, non-coordinated, and international emerging issues can be found on the Appeals International website.

    3. International also receives referrals pertaining to economist and financial product issues.

  4. Domestic Operations will also receive referrals pertaining to Engineer issues.

    Note:

    Any references to Appeals Officer (AOs within this section also includes the Appeals Team Case Leader (ATCL) and the Appeals Team Manager (ATM) positions.

    Note:

    Any references to Technical Specialist within 8.7.3 includes the Appeals Domestic Technical Specialist and the International Technical Specialist.

    Note:

    Unless otherwise specified, any references to Director within 8.7.3 includes the Director, Domestic Operations and the Director, International Operations.

    Note:

    Any reference to Compliance Large Business and International Division will be referred to as LB&I.

8.7.3.2  (10-01-2012)
Coordinated and Appeals Emerging Issues

  1. The three types of program issues are:

    • Compliance Coordinated Issues

    • Appeals Coordinated Issues

    • Emerging Issues

  2. The Appeals Domestic and International Operations Programs are similar to the Compliance Large Business and International (LB&I), Issue Practice Groups, International and Industry Technical Guidance. An Appeals Domestic Technical Specialist is selected for each industry and specialty area. However, the coordination of international issues falls under the expertise of the International Operations Program and an International Technical Specialist is designated as the Technical Specialist for an International Issue.

8.7.3.2.1  (10-01-2012)
Compliance Coordinated Issues

  1. Appeals generally develops settlement guidelines when an issue is coordinated by LB&I. These issues along with the Technical Specialist's name are listed on the Appeals Web site at the Domestic/International Operations Issue Locator. For the public, they are also listed at www.irs.gov/appeals .

  2. Once Compliance issues a Coordinated Issue Paper (CIP), if the issue is not already an Appeals Coordinated Issue (ACI), the Technical Specialist prepares a memo designating the issue as a Compliance Coordinated Issue (CCI) in Appeals. Effective with the date of the issuance of the CIP, the Appeals Officer must request the review and concurrence of the Appeals Technical Specialist before discussing the settlement with the taxpayer. The CIP is used as a resource to explain the legal position of the government. However, Appeals is not required to follow it. In determining the appropriate settlement, the Appeals Officer and the Technical Specialist must consider the taxpayer’s position and make an independent assessment of the litigating hazards based on all available information.

  3. The procedures outlined in IRM 1.4.28.9, Referrals to Domestic Operations, International Operations, and TEGE, and IRM 8.2.1.7, Appeals Officer’s Preliminary Review of Case, require Appeals Officers to refer all cases containing coordinated issues to Domestic or International Operations.

  4. Based on workload and scheduling, the Technical Specialist may be assigned as a team member or a consultant on the case. The Technical Specialist’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).

  5. Issues are de-coordinated with the approval of the Director, Specialty Operations. Factors considered include, but are not limited to:

    • De-coordination by Compliance

    • Issue no longer raised by Compliance because of case or statutory law change,

    • Cases with issue no longer coming to Appeals as taxpayers are conceding in Compliance,

    • The few cases remaining in Appeals are controlled by the Technical Specialist and a settlement has been worked out,

    • A prolonged period of inactivity in Appeals.

  6. CCIs along with the assigned Technical Specialist are listed on the Appeals web site in the Domestic/International Operations Issue Locator. For the public, they are also listed on www.irs.gov. Search for Domestic/International Operations Issue Index.

8.7.3.2.2  (10-01-2012)
Appeals Coordinated Issues

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

  2. The primary Technical Specialist 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 recommends an issue for coordination to the Director, Specialty Operations who is the approving official.

  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:

    • An entire industry or occupational group, or

    • A large number of partners, shareholders, or creditors; or

    • A nationwide tax avoidance scheme or non-compliance transaction.

  4. The ACI program encompasses any of the following:

    1. Legal Issues – issues where the primary dispute pertains to a determination of the legal standard to be applied.

    2. Factual Issues – issues where the primary dispute is the determination of the underlying facts or the application of the underlying facts to the legal standard.

    3. Category of case – cases with the same or similar characteristics requiring a unified approach but not necessarily the same issues. Issues designated as category of case do not require review and concurrence.

  5. 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 Specialist for the industry or specialty area in which the issue is coordinated by Compliance is the primary Technical Specialist and has review and concurrence responsibility on the issue. The primary Technical Specialist consults with other Technical Specialists who also have the issue in their industry or specialty area.

  6. The procedures outlined in IRM 1.4.28.9 and IRM 8.2.1.7 require the Appeals Officers to refer all cases containing coordinated issues to Domestic or International Operations. For ACI this includes both issues and category of case designations.

  7. Based on the Technical Specialist’s workload and scheduling, the Technical Specialist may be assigned as a team member or a consultant on the case. The Appeals Officer must request review and concurrence from the Technical Specialist on all legal and factual ACI issues prior to discussing the settlement with the taxpayer. (Although a referral is still required, review and concurrence is not required on a Category of Case.)

  8. At a minimum the Technical Specialist for the ACI category of case industry or specialty area should provide to the Appeals Officer an information package preferably before the Appeals conference, so the Appeals Officer can get insight into the issue, industry, or specialty area.

  9. Issues are de-coordinated with the approval of the Director, Specialty Operations. Factors considered include, but are not limited to:

    • Issue no longer raised by Compliance because of case or statutory law change,

    • Cases with issue no longer coming to Appeals as taxpayers are conceding in Compliance,

    • The few cases remaining in Appeals are controlled by the Technical Specialist and a settlement has been worked out, and;

    • A prolonged period of inactivity in Appeals.

  10. ACIs along with the assigned Technical Specialist are listed on the Appeals web site in the Domestic/International Operations Issue Locator. Search for Domestic-International Issue Locator. For the public, they are also listed on www.irs.gov. Search for Domestic-International Issue Index.

8.7.3.2.3  (10-01-2012)
Appeals Emerging Issues

  1. An Emerging Issue (EM) 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 Technical Specialist, 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.

  2. Upon identifying possible emerging issues within their industry and specialty areas, the Technical Specialist discusses the issues with their Appeals Team Manager (ATM).

  3. If the ATM concurs with the recommendation for designation, the Technical Specialist forwards a memorandum for the signature of the Director, Specialty Operations through their Director, Domestic or International Operations.

  4. IRM 1.4.28.9 and IRM 8.2.1.7 require Appeals Officers to refer all cases containing issues listed on the Appeals Emerging Issue list to Domestic or International Operations.

  5. Based on workload and scheduling, the Technical Specialist may be assigned as a team member or a consultant on the case. At a minimum, the Technical Specialist for the industry or specialty area should provide to the Appeals Officer an information package preferably before the Appeals conference, so the Appeals Officer can gain insight into the issue, industry, or specialty area.

  6. The Appeals List of Emerging Issues (EMs) is also listed on the Appeals Web site on the Domestic/International Operations Issue Locator. For the public they are listed at www.irs.gov/appeals.

8.7.3.2.4  (10-01-2012)
Factors for Designating Issues as Appeals Coordinated Issues (ACI) or Emerging Issues (EM)

  1. Factors to consider in designating an issue as an Appeals Coordinated Issues (ACI) or Emerging Issues (EM):

    1. Level of coordination and commitment by Compliance;

    2. Is there a commitment to issue binding guidance to the Field in Compliance (CIP or Similar document);

    3. Is there a Compliance Subject Matter Expert or similar key person assigned;

    4. Volume of cases in Compliance;

    5. Number of industries effected;

    6. Issue addressed at the Commissioner's level;

    7. Geographic dispersal of cases;

    8. Impact on voluntary compliance;

    9. Legal issue vs. factual issue, or both

    Note:

    Technical Specialists are assigned to monitor high profile issues, but the issue is not necessarily coordinated until we know the issue will be coming to Appeals.

  2. Factors considered in timing the coordination of an ACI issue:

    1. Has Compliance begun to issue Notice of Proposed Adjustments (NOPAs) to taxpayers?

    2. Are cases currently in Appeals?

    3. Issues will be coordinated only when cases are expected to be coming to Appeals within the next six months.

8.7.3.3  (10-01-2012)
Appeals Technical Specialists’ Roles and Responsibilities

  1. The Technical Specialist -

    1. Serves as the focal point for activities involving issues in the industry or specialty area by providing continual advice, guidance, and assistance to Appeals Officers;

    2. Develops and maintains expertise on both Coordinated and Emerging issues;

    3. Attends briefings with Chief Counsel, Treasury, and Compliance on areas or issues in the industry or specialty area when the briefings may lead to Revenue Rulings, Revenue Procedures, Regulations, formal advice, etc.;

    4. Brings matters of nationwide importance to the attention of their ATM for elevation to the Director;

    5. Works with Appeals, Counsel, Compliance and taxpayers on alternate dispute resolution initiatives including but not limited to: Industry Issue Resolution (IIR), Fast Track Settlement (FTS), etc.;

    6. Works cases in the industry or specialty area, as time permits, either as a team member, consultant, or key Appeals Officer. When possible he/she serves as a team member on the initial cases worked by Appeals in their area of expertise, especially Fast Track Settlement cases;

      Note:

      IRM 8.1.1.1(6). In furtherance of the Appeals Mission, it is expected that Appeals personnel provide a unified Appeals position to taxpayers and/or practitioners in the settlement of an issue. This extends to all members of Appeals involved in the case. While there may be differing positions and/or opinions during the discussion of an issue, the ultimate resolution of the issue should be based upon the conclusions reached by the Appeals employee with ultimate responsibility for the case.

    7. Attends both internal and external training seminars and other courses;

    8. Expresses views/concerns informally to Compliance, and Counsel, as appropriate, about Coordinated and Emerging Issues. Deals with issues in general, but does not consult on specific cases unless Delegation Order (DO) 4-25 (as revised) found at IRM 1.2.43.26, or Delegation Order (DO) 4-24 (formerly DO-236, Rev. 3) found at IRM 1.2.43.25 applies;

    9. Trains others in his or her field of expertise;

    10. Prepares ASGs on Compliance Coordinated Issues and Appeals Coordinated Issues (except category of case issues), when appropriate;

    11. Reviews the settlement of coordinated issues and conveys concurrence or disagreement; all disagreements are in writing;

    12. Provides guidance on issues in their industries or specialty areas not officially coordinated;

    13. Prepares an information package for Appeals Coordinated Issues, Category of Case, and Appeals Emerging Issues;

    14. Reviews and updates settlement guidelines and information packages on a timely basis;

    15. Interacts with taxpayers or representatives, at their request, to discuss the application of law to their facts and circumstances and the recommended settlement of their coordinated issue on cases under Appeals consideration (traditional, fast track, DO 4-25, etc.). Generally other members of the team negotiating the settlement of the issue also participate in these discussions;

    16. Maintains an activity record by case when contacted by an Appeals Officer on Compliance and Appeals Coordinated issues and Appeals Emerging issues. Include: name of taxpayer; Appeals Officer assigned the case; date of contact; and nature of discussion; and

    17. Prepares memos recommending the coordination or de-coordination of issues.

  2. The Appeals Technical Specialist is responsible for entering all time spent on Compliance/Appeals coordinated issue matters on Line 6. Time spent working on direct assignment, team member or DO 4-25 cases is charged to the specific case.

8.7.3.3.1  (10-01-2012)
Appeals Settlement Guidelines

  1. The Technical Specialist develops Appeals Settlement Guidelines (ASGs) for CCIs and ACIs, when appropriate (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 Technical Specialist completes a draft ASG after obtaining an understanding of both the government's and taxpayer's position. Typically, this requires an analysis of actual cases, which includes consideration of both parties' written and/or oral presentations.

  2. Technical Specialists submit draft ASGs through their ATM to the Director (or his/her designee, e.g., Technical Advisor/Tax Law Specialist) for comment. Following the review, the ASG is concurrently forwarded for review and comment to -

    • Field Operations and Domestic/International Operations ATMs for a 30 calendar day comment period;

    • Counsel for review and comment on the Appeals Settlement Guidelines within 90 calendar days.

  3. The Technical Specialist, working in collaboration with his/her ATM and the Director (or designee), considers any comments received from Appeals and Chief Counsel's office, and if necessary revises the draft ASG and submits it through his/her ATM to the Director 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.

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

  5. The Director recommends the Appeals Settlement Guidelines for approval to the Director, Specialty Operations, who is the approving official.

  6. Revised ASGs 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 on Decision is issued, or some other event occurs that might affect the weight the decision is given when reconsidering the appropriate settlement range.

  7. The Director, Specialty Operations 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.

8.7.3.3.2  (10-01-2012)
Distribution of Appeals Settlement Guidelines

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

    1. An Appeals Officer who has the coordinated issue in a specific case;

    2. A Compliance Case Manager who has coordinated an issue in a specific case, or

    3. The Compliance Subject Matter Expert who has to concur with the settlement at the Compliance level in order for the settlement to become final. See IRM 8.7.3.4.3 for a discussion of Delegation Order 4-25 (as revised) found at IRM 1.2.43.26.

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

  3. 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.

8.7.3.4  (10-01-2012)
Review and Concurrence Procedures

  1. The review and concurrence requirement is effective at the time an issue is designated an Appeals Coordinated Issue (ACI) or Compliance issues a Coordinated Issue Paper (CIP). The ATM provides oversight regarding the review and concurrence determinations of the Technical Specialist.

  2. Material involvement of the Technical Specialist, including review and concurrence, is also required for settlements by Appeals Officers on Fast-Track Settlement (FTS) and other alternative dispute resolution cases.

8.7.3.4.1  (10-01-2012)
Review and Concurrence - Appeals Technical Specialist Responsibility

  1. When contacted by an Appeals Officer either through the referral process or other contact, the Technical Specialist -

    1. Discusses the legal authority, pertinent facts, and nationwide impact of the issue;

    2. Gives the Appeals Officer a copy of the Appeals Settlement Guidelines or Appeals Settlement Position (ASP), if approved;

    3. Becomes involved in the settlement negotiations on an as-needed basis;

    4. Avoids the "trade-off" settlement of a coordinated issue. If circumstances compel the trading of a coordinated issue with another issue in a multi-issue case for settlement purposes, the Technical Specialist's review and concurrence extends to the consideration of non-coordinated issues traded or settled as part of the settlement of the coordinated issue.

      Note:

      Appeals does not trade penalty issues. Penalties will be settled on the merits and the hazards of litigation surrounding the penalty issue only.

    5. Reviews the rough draft Appeals Case Memorandum (ACM) and gives oral approval if the settlement is acceptable;

    6. If the settlement is not acceptable, provides a written response (rebuttal) to the Appeals Officer. If agreement is not reached, the respective managers attempt to resolve the dispute. If the Appeals Team Managers (ATMs) cannot resolve the dispute, the ATMs will refer it to the Appeals Area Director and the Director, of the respective Appeals Specialty Operations organization. If not resolved at the Area Director level, the issue is referred to the Director, Specialty Operations for a decision.

8.7.3.4.2  (10-01-2012)
Review and Concurrence - Appeals Officer's Responsibility

  1. Upon initial review of a case, review the Lists of Compliance Coordinated Issues and Appeals Coordinated Issues on the Appeals web site (Domestic/International Operations Issue Locator) or www.irs.gov web site.

  2. Before scheduling the initial conference on the coordinated issue make a referral to Domestic/International Operations following the procedures contained in IRM 1.4.28.9 and IRM 8.2.1.7.

  3. Advise the taxpayer the issue is coordinated and any settlement of the issue requires the review and concurrence of the Technical Specialist.

    Note:

    IRM 8.1.1.1(6). In furtherance of the Appeals Mission, it is expected that Appeals personnel provide a unified Appeals position to taxpayers and/or practitioners in the settlement of an issue. This extends to all members of Appeals involved in the case. While there may be differing positions and/or opinions during the discussion of an issue, the ultimate resolution of the issue should be based upon the conclusions reached by the Appeals employee with ultimate responsibility for the case.

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

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

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

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

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

  9. 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.

8.7.3.4.3  (10-01-2012)
Review and Concurrence of Coordinated Issues under Delegation Order 4-25 (revised)

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

  2. See IRM 1.2.43.26 for text of DO 4-25.

8.7.3.4.3.1  (10-01-2012)
Review and Concurrence of Coordinated Issues under Delegation Order 4-25, Part 1 (paragraphs 1-13) as effective October 18, 2008

  1. For settlements under paragraphs 1 - 13 of DO 4-25, Compliance managers must get the review and concurrence of both the Appeals Technical Specialist and the Compliance Subject Matter Expert for the issue prior to discussing a settlement with the taxpayer. (See IRM 4.46.5.6, Delegation Order 4-25, Settlement Authority for Coordinated Issues, for a discussion of LB&I's procedures.) Paragraphs 1-13 of DO 4-25 apply to all operating divisions, including LB&I, SB/SE, TEGE and W&I.

  2. When the Compliance manager contacts the Appeals Technical Specialist, the Technical Specialist,

    1. Gives them the Appeals Settlement Guidelines (ASGs) and Appeals Settlement Position (ASP) and any additional information which is helpful in formulating a settlement;

    2. Becomes involved in settlement negotiations with Compliance and the taxpayer, as needed;

    3. Keeps in contact with the Compliance manager and the Compliance Subject Matter Expert;

    4. Reviews the proposed settlement submitted by the Compliance manager (with Form 5701S) and any related Form 906, Closing Agreement, and/or Form 870-AD , Offer to Waive Restrictions on Assessment and Collection of Tax Deficiency and to Accept Overassessment, Form 890-AD, Estate Tax Offer of Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and to Accept Overassessment, Form 2504-AD, Excise or Employment Tax Offer of Agreement to Assessment and Collection of Additional Tax and Offer of Acceptance of Overassessment, and supporting documentation before the Compliance manager discusses settlement ranges with the taxpayer. The Compliance manager submits a settlement memorandum which is similar to the Appeals Case Memorandum (ACM);

    5. Either concurs with the proposed settlement and conveys that concurrence or explains the reasons for non-concurrence with the proposed settlement. After providing the explanation, continues to work with the Compliance Manager in an attempt to reach a proposed settlement that is acceptable to both parties;

    6. Maintains activity records.

  3. When Compliance utilizes paragraphs 1-13 of Delegation Order 4-25 to settle an issue, in order to facilitate the capture and tracking of taxpayer and case information, Form 13970, Delegation Order 4-25: Appeals Review and Concurrence, is forwarded in electronic format to the Technical Specialist by the Compliance manager. The Compliance manager completes sections I, II and III of the form and the Technical Specialist completes the remainder.

8.7.3.4.3.2  (10-01-2012)
Review and Concurrence of Coordinated Issues under Delegation Order 4-25, paragraphs 14 - 26 as effective October 18, 2008

  1. For certain issues designated by the Chief, Appeals, Delegation Order 4-25 delegates authority to settle cases based on an Appeals Settlement Position or Appeals Settlement Guideline, without a case-by-case review and concurrence by Appeals. Paragraphs 14–26 of Delegation Order 4-25 apply to all operating divisions, including LB&I, SB/SE, TEGE and W&I. The preamble to paragraphs 14-26 provides:

    The following authorities relating to Settlement Offers, Closing Agreements and Settlement Agreements under Section 6224(c) apply only to specific coordinated issues designated by the Chief Appeals.

  2. For cases under the jurisdiction of Compliance the following procedures apply:

    1. Appeals and the Operating Division(s) work together to identify issues or categories of cases where the delegation of authority pursuant to DO 4-25 referenced above is in the best interest of the Service.

    2. The Chief, Appeals issues a memorandum to the appropriate Operating Division responsible for designating a specific issue or category of case which may be resolved using the previously cited provisions of DO 4-25. The Director, Domestic or International Operations ensures the issues or categories of cases designated for resolution under DO 4-25 have a champion for implementation and are listed on the Appeals web site in the Domestic/International Operations Issue Locator.

    3. The appropriate Compliance Director appoints a management official to champion the implementation of DO 4-25. The champion assures information concerning the issue or category of case is listed on the appropriate Operating Division’s web site. Example: SBSE Abusive Transactions web site at http://abusiveshelter.web.irs.gov See IRM 1.2.43.26 for complete text of DO 4-25.

    4. The following Aging Reason Codes (ARC) are designated for use in identifying and tracking Compliance cases where DO 4-25 part 2 (paragraphs 14-26) is used:

      Reason Code Description
      80 An agreed case where the settlement is based on Appeals Settlement Guidance.
      81 An unagreed case where a settlement based on Appeals Settlement Guidance is proposed by the examiner but not settled.
      82 Either an agreed or unagreed case where a settlement based on Appeals Settlement Guidance is not offered to the taxpayer by the examiner.
      83 A case where settlement based on Appeals Settlement Guidance is offered and pending.

    5. The Compliance Subject Matter Expert (or comparable position) and the Appeals Technical Specialist develop draft implementation procedures specific to the designated issue or category of case. These procedures are flexible and open to revision as needed.

      Guidance typically included in designated issue or category of case procedures includes:
      • Who exercised the delegated authority.

      • Form and availability of Appeals settlement guidance that is most useful for the examiners and managers. Appeals settlement guidance is only available to IRS personnel who have a need to know. See IRM 8.7.3.3.2. This document is not given to the taxpayer or their representatives.

      • Closing procedures including the use (as appropriate) of Form 870-AD, Form 890-AD, Form 2504-AD, and/or closing agreements Form 866 or Form 906, standardized language explaining a settlement based on Appeals guidance, etc.

      • Responsibilities for tracking and reporting cases closed using DO 4-25.

      • Roles of Appeals Technical Specialist, Technical Advisor(s) and managerial officials.

      • Wording, flow, and retention of Form 5701S.

      • Materials and instructions to post to issue web sites.

      • Plans to familiarize those Compliance employees who are examining, approving, or processing DO 4-25 cases with the procedures.

      • Once approved by the designated Operating Division and Appeals champions, procedures specific to an identified issue or category of case are disseminated to appropriate Operating Division management officials and examiners, and made readily accessible through audit guides, web sites, or other information sources normally maintained by the Compliance Subject Matter Expert. A key location for such dissemination of information is the Operating Divisions web site. For SB/SE Abusive Transaction the web site is http://abusiveshelter.web.irs.gov.

      • Director, Appeals Domestic or International Operations and the designated Operating Division champion design oversight procedures to assure (1) settlements are offered in accordance with the terms of the Appeals Settlement Position, Guidelines or other Guidance; (2) agreement forms (including Form 870-AD, Form 890-AD , Form 2504-AD , and Form 906) are properly prepared and executed (if standard language was developed for closing agreements, that it is, in fact, being used; and (3) taxpayers understand they are giving up rights to further appeals or file refund claims because settlements are based on litigating hazards and are final.

      • Oversight may take the form of open or closed case reviews. The specific procedures are determined in each issue and may vary based on the specific facts of each issue. Factors which impact the specific procedure include the terms of the settlement, complexity of the cases, number of cases, and the geographical location of cases and examiners.

      • Results of any reviews conducted are discussed and used to determine if any changes are warranted to the procedures or their application.

      • If it is determined the designation of an issue or category of case is no longer appropriate, the Chief, Appeals notifies the Operating Division(s) in writing of the decision to discontinue the delegation of authority.

8.7.3.4.3.3  (10-01-2012)
Appeals Settlement Positions (ASPs) for Delegation Order 4-25

  1. As determined by the Director, Domestic or International Operations, the Technical Specialist utilizes the working draft of the ASG as an ASP for purposes of providing settlement guidance to appropriate IRS officials on an expedited basis until an ASG is finalized.

  2. An ASP, working draft ASG, may be prepared once Appeals obtains sufficient information from Compliance, Counsel and taxpayers regarding (1) the facts of the issue, (2) positions to be argued in the event of litigation, and (3) taxpayer arguments; and, an adequate consideration is given to the hazards of litigation to support the settlement position.

  3. The Technical Specialist and his/her ATM make a recommendation for using the working draft of the ASG as a basis for settling cases under DO 4-25.

  4. Technical Specialists submit draft ASPs through their ATM to the Director (or his/her designee, e.g., Technical Advisor/Tax Law Specialist).

  5. The Director recommends the settlement for approval to the Director, Specialty Operations who is the approving official.

  6. All ASP drafts require the watermark "for official use only."

  7. ASPs are available only to IRS personnel who have a need to know, such as -

    1. An Appeals Officer who has the coordinated issue in a specific case;

    2. A Compliance Case Manager who has the coordinated issue in a specific case; or

    3. The Compliance Subject Matter Expert who has to concur with the settlement at the Compliance level in order for the settlement to become final.

    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 final) 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.

  8. The Technical Specialist continues to work on the Appeals Settlement Guidelines in accordance with IRM 8.7.3.3.1.

8.7.3.4.3.4  (10-01-2012)
Settlement Not Reached Under Delegation Order 4-25 (as revised)

  1. If the Compliance manager, Subject Matter Expert and the Appeals Technical Specialist and his/her manager cannot agree on an acceptable settlement, the matter is elevated to a higher level of management: The following are examples:

    • Appeals Technical Specialist, through his/her ATM, to the Director over the respective issue,

    • Compliance Manager to Territory Manager

    • SBSE Territory Manager to Director over issue

    • Compliance Subject Matter Experts, through his/her manager, to Director, Issue Practice Groups, International and Industry Technical Guidance

  2. If agreement is not reached at the higher level of management, the case manager ceases settlement negotiations. Disagreements are not elevated further.

  3. If the taxpayer does not agree with the proposed settlement, the issue is unagreed and the full adjustment (unsettled position) is closed to Appeals if protested or included in the statutory notice of deficiency. Compliance must ensure both the Form 5701 and Form 5701S are in the case file when it is submitted to Appeals.

8.7.3.4.3.5  (10-01-2012)
Tracking of Information for Issues Settled under Delegation Order 4-25

  1. The Technical Specialist records time devoted to review and concurrence activities as well as a count of the number of cases settled by Compliance under these provisions.

  2. Form 13970, Delegation Order 4-25: Appeals Review and Concurrence, is used to capture taxpayer and case information to facilitate tracking.

  3. When a Technical Specialist is notified of a proposed DO 4-25 settlement requiring review and concurrence, the Technical Specialist forwards the form electronically to Compliance for completion of sections I, II, and III. Compliance returns the form electronically to the Technical Specialist.

  4. Once all documents necessary for the review and concurrence process are received from Compliance, the Technical Specialist reviews sections I - III of the form and reconciles them to the other case documents received; completes section IV, and electronically forwards the form to the Appeals Processing Team Manager (PTM) of his or her local/Area APS unit.

    1. ACDS feature code D5 applies to all cases received for review and concurrence. Feature code TS also applies if the issue or case is coordinated as part of the tax shelter program.

    2. Type of case for ACDS purposes is one of the following: EP, EO, EMPL, ES, EX, G, I, TEFRA, TEFRAI, TEFRAP. Seek guidance from the local/Area PTM if the type of case is unclear.

  5. APS establishes the case on ACDS and assigns the WUNO to the Technical Specialist whose name appears in section IV.

  6. Jurisdiction of the case and responsibility for statutes of limitations remain with Compliance during the review and concurrence process.

  7. The Technical Specialist charges review and concurrence time to the case, and makes appropriate notes on the case activity record.

  8. The Technical Specialist notifies Compliance whether or not the settlement is approved, following the provisions in IRM 8.7.3.4.3.

  9. If the Technical Specialist concurs with the Compliance proposed settlement:

    1. Closing code 14 is used.

    2. Revised dollar amounts for tax and penalty reflects the adjustment shown on the RAR. If the coordinated issue is the only issue in dispute, use the amounts of tax and penalty shown on the RAR. Otherwise, estimate the tax and penalty attributable to this issue using a marginal tax rate of 35% for corporate taxpayers and 39% for individual taxpayers, and the agreed upon penalty percentage.

    3. Proposed dollars for tax and penalty is the Technical Specialist's estimate of the tax and penalty amounts had the Appeals settlement not been offered to the taxpayer. The estimates are based on the marginal tax rates shown above and full penalty assertion if Compliance proposed any penalty.

    4. Estimates are used in order to avoid the need for multiple computations.

  10. If the Technical Specialist does not concur with the Compliance proposed settlement:

    1. Closing code 15 is used, but only after the procedures described in IRM 8.7.3.4 are completed.

    2. Revised dollar amounts for tax and penalty reflects the adjustment shown on the RAR. To determine the Revised tax dollars, use the same instructions shown above (when the Technical Specialist concurs with the Compliance proposed settlement). The Revised dollar amount of the penalty is computed using the Compliance proposed penalty percentage.

    3. Proposed dollars for tax and penalty are the same as the Revised dollar amounts.

  11. At the completion of the review and concurrence process, the Technical Specialist completes section V of the form and sends it to the PTM of his or her local/Area APS unit for closing. No managerial approval is required. The date the form is completed constitutes the closing date.

  12. Send copies of the case activity record and Form 5701S accompanies the form when it is sent to APS for closing. All documents are electronically sent to the local/Area Processing Team Manager.

  13. APS closes the case off ACDS using the information in section V of the form.

  14. Appropriate adjustments to Master File and/or non-Master File accounts for the taxpayer or related entities are made by Compliance and not by Appeals.

8.7.3.4.4  (10-01-2012)
Full Concession of a Coordinated Issue Contrary to Service Position

  1. 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.

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

    1. Include in Section 3 a concurrence statement and signature line as follows –

      "The Appeals [insert Technical Specialist area] Technical Specialist for [insert industry or specialty] concurs in the recommended disposition of the [insert issue]" .

      [insert name] , Appeals [insert Technical Specialist area] Technical Specialist for [insert industry or specialty]

    2. After signing, the Technical Specialist sends the Form 4368 to the Appeals Officer for his or her signature and then through their ATM/Director to the Director, Specialty Operations for Chief, Appeals concurrence.

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

    1. Prepare Form 4368 and state in section 3 that the case "is in Compliance and that the Compliance manager is exercising his or her settlement authority under Delegation Order 4-25 " .

    2. Send Form 4368 to the Compliance manager (LB&I team manager or SBSE Territory manager or TE/GE group managers or team managers who signs it), attach a copy of the signed Form 5701S and the settlement memorandum to it, and mail it to the Chief, Appeals.

8.7.3.4.5  (10-01-2012)
Review and Concurrence of Coordinated Issues in Fast Track Settlement Cases

  1. 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 Specialist, the Appeals Technical Specialist normally participates in the Fast Track Session with the taxpayer and Compliance. Where the Appeals Technical Specialist is unable to attend the Fast Track Session meeting, the Appeals Technical Specialist is available by phone to discuss review and concurrence.

  2. If, for whatever reason, the Appeals Technical Specialist 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 Specialist. Before executing a Fast Track Session Report that includes CCI/ACI issues, the Appeals Officer obtains the concurrence of the Appeals Technical Specialist.

  3. If there is a disagreement between the Appeals Technical Specialists and the Appeals Officer on how to settle the issue, resolution procedures follow IRM 8.7.3.4.

8.7.3.5  (10-01-2012)
Designation of Coordinated Issue for Litigation

  1. In some instances, Counsel may want to designate for litigation a coordinated issue in a case under Appeals jurisdiction. See Delegation Order 8-8 regarding designating issues for litigation.

  2. The Director notifies the appropriate Appeals Area Director of a coordinated issue designated for litigation in a specific case.

  3. Generally, the designation for litigation does not preclude the settlement of other cases involving the issue or the non-designated issues in the designated case. However, the Appeals Officer will not settle the coordinated issue designated for litigation in a specific case.

8.7.3.6  (10-01-2012)
Coordinated Issue Settlement Philosophy

  1. This subsection provides additional direction for Technical Specialists participating in cross-functional issue workgroups and devising settlements for issues coordinated by Appeals and other functions.

8.7.3.6.1  (10-01-2012)
Appeals Role on Issue Management Teams (Including ATATs)

  1. To assure Appeals independence, Appeals will no longer participate in Issue Management Teams as of April 4, 2011.

8.7.3.6.2  (10-01-2012)
Settlement of Coordinated Issues

  1. The Technical Specialists and Appeals Officers follow the procedures listed above for Compliance Coordinated Issues, Appeals Coordinated Issues and Emerging issues, including the referral procedures at IRM 8.2.1.7(2).

  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:

    • Administrative offers based solely on conservation of resources.

    • Offers based upon economic equivalency concepts involving moving adjustments from one year to another with no basis in the law for doing so.

    • Offers based upon the taxpayer’s internal rates of return (IRR), or internal capital rates.

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

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

8.7.3.6.3  (11-06-2008)
Settlement of Penalties Related to Coordinated Issues

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

  2. 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.

8.7.3.6.4  (10-01-2012)
Agreement Forms

  1. The Technical Specialist determines which agreement forms are appropriate for any coordinated issue.

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

  3. 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.

8.7.3.6.5  (10-01-2012)
Statutory Notices on Unagreed Listed Transactions and Related Penalties

  1. 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.

  2. 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 Domestic Operations or International Operations web sites.

  3. Appeals Officers conduct 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.

  4. 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.

  5. The Appeals Officer continues to prepare statutory notice language, the Appeals Case Memorandum, 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).

  6. Related issues (employment tax, plan qualifications, tax exempt status determinations and penalties) are considered by the Appeals Officer 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.

  7. 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 Appeals Case Memorandum 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.

  8. If the LT Feature Code has been properly added, Form 5402 automatically populates the following identification on Form 5402: "Unsettled Listed Transaction Case – Transfer to Originating Function for issuance of statutory notice."

8.7.3.7  (10-01-2012)
International Issues

  1. IRM 1.4.28.9 and IRM 8.2.1.7 require referral of all cases containing international Issues (as presented in the International Examiner’s report) to the Appeals Team Managers of the International Technical Specialist groups found on the International web page. If the international issue to be referred involves a section 482 or 936 issue or the valuation of intangibles then the issue should also be referred to the manager of the Economist Group.

  2. Issues involving Tax Treaties and the Mutual Agreement Procedure of U.S. Income Tax Treaties are referred to a Technical Specialist during the pre-conference review of the case if possible. On occasion, the assistance of an Appeals Technical Specialist is requested by the U.S. Competent Authority in the development and negotiation of double taxation cases brought forward by taxpayers to the Competent Authority.

8.7.3.7.1  (10-01-2012)
Competent Authority Cases

  1. 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.

  2. 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.

  3. 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.

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

  5. 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.

  6. 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:

    1. Excerpts from the taxpayer’s protest pertaining to the issue;

    2. Copies of all additional documentation or evidence offered by the taxpayer during the appeal process which impact on the issue; and

    3. A memorandum to the LB&I Director, International outlining the details of any fact-finding discussions with the taxpayer, settlement negotiations on the MAP issue and the terms and conditions of any proposed or tentative settlement reached with the taxpayer including an analysis of the hazards of litigation or other factors weighed which may contribute to a reduction of the amount at issue as originally proposed. Make sure this memo clearly indicates if the case may be subject to Joint Committee review. The U. S. Competent Authority has exclusive jurisdiction to resolve issues they accept for consideration.

8.7.3.7.2  (10-01-2012)
Potential Competent Authority Cases

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

    1. Appeals does not attempt to hinder or prohibit taxpayers as part of a settlement from seeking Competent Authority consideration, nor does Appeals make settlement concessions based upon taxpayers’ offers to waive their rights to Competent Authority consideration.

    2. Appeals Officers, upon receipt, scrutinizes the issue to determine whether the facts and case documentation are sufficiently developed so Appeals can consider the merits of the adjustment. All cases not adequately developed are returned to Compliance in accordance with IRM 8.2.1.5, Receipt of New Assignment by Appeals Officer.

    3. Generally, it is in the overall best interest of the U.S. Treasury for Appeals to avoid lump sum and traded issue settlements involving potential Competent Authority issues. Sacrificing part or all of an international tax adjustment in order to obtain an agreement on a domestic issue may result in uneven treatment between the U.S. and "treaty" taxpayers. On a case-by-case basis, Appeals case processing and settlement objectives may appear better served by employing traded issue or lump sum settlements; however, the overall result (when combining all potential Competent Authority issues resolved in Appeals) may render unjust financial benefits not intended by the tax treaties to treaty partner countries. Therefore, Appeals does not settle a potential Competent Authority issue, except on its merits.

  2. 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).

  3. 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 LB&I Deputy Commissioner (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.

    1. If a taxpayer enters into a written agreement with respect to potential Competent Authority issue with Appeals (or Compliance), the U.S. Competent Authority endeavors only to obtain correlative adjustment from the treaty country and does not undertake actions that otherwise change such agreements.

    2. If Appeals and the taxpayer reach a settlement of a potential Competent Authority issue, the taxpayer must pursue a correlative adjustment from the treaty partner through the mutual agreement procedure mechanism, or risk losing the foreign tax credit associated with the correlative adjustment. (See Treas. Reg. 1.901-2(e)(5)(i) and Rev. Rul. 92-75).

  4. 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).

8.7.3.7.3  (08-10-2007)
Appeals Review Panels Under the Mutual Agreement Procedure Canada-United States Income Tax Convention

  1. 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.

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

    1. An income tax treaty generally permits taxpayers to request CA assistance when they consider actions of the United States, the treaty country, or both, result or will result in taxation contrary to the provisions of the treaty.

    2. Income tax treaties generally permit taxpayers to request assistance, for example, to relieve economic double taxation arising from an allocation under IRC section 482 or an equivalent provision under the laws of a treaty country.

    3. For CA procedures, see Rev. Proc. 2006-54, Rev. Proc. 2006-49 IRB 1035, Rev. Proc. 2002-2 C.B. 242 , or any successor revenue procedure.

  3. 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.

  4. 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.

  5. 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.

8.7.3.7.3.1  (10-01-2012)
Appeals Review Panel Procedures

  1. In the event the CAs are unable to agree on the underlying facts and circumstances of a specific MAP case within six months after the first face-to-face negotiating meeting for the case, refer any facts and circumstances issues to an Appeals Review Panel.

  2. A facts and circumstances issue presented to the Appeals Review Panel may involve a taxpayer request that the CAs attempt to resolve the issue for certain subsequent taxable periods if the same issue continues in those periods. See Section 8 of Rev. Proc. 2006-54.

  3. Submit any CA referral requests for an Appeals Review Panel in writing to the CRA and IRS Chief, Appeals for approval. Detail the factual disagreements and the respective views of the CAs in the request.

    1. For IRS Appeals, Tax Policy and Procedure (Exam) coordinates approval and assignment with Appeals International Operations and the Fast Track Settlement Program Manager.

    2. Tax Policy and Procedure (Exam) prepares a memorandum for signature by the Director, Specialty Operations to notify the United States and Canada in writing of their acceptance (with a list of participants) or rejection of a referral within 30 days of the date the request was made by the CAs. If the referral is not accepted, Tax Policy and Procedure (Exam) prepares a memorandum explaining why.

  4. For approved referral requests, the CRA and IRS Appeals organizations each appoint a member of the organization with decision-making authority (referred to as the "Official" ) to participate in an Appeals Review Panel proceeding.

    1. Appropriate IRS Appeals personnel, including specialists and their managers, may support the Appeals Official and participate in the Appeals Review Panel proceedings, which include meetings, conference call discussions, and providing necessary information to achieve a comprehensive understanding of the issues.

    2. Unless the CAs agree otherwise, an Appeals Official or member appointed to the Panel must not have had previous involvement in an audit of the subject taxpayer, an appeal, or simultaneous Appeals/Competent Authority request filed by such taxpayer for the tax years under CA jurisdiction.

    3. The CRA and the IRS Appeals Official updates the Appeals Review Panel member list of participants as necessary and exchanges it with each other.

    4. The approved CA referral request is date stamped by Tax Policy and Procedure (Exam), and a photocopy is provided by the assigned Appeals Official to Appeals Account and Processing Supports (APS) for input on the Appeals Centralized Database System (ACDS). The ACDS feature code "CA" is used for Competent Authority cases.

  5. The CAs forward a written submission detailing the facts and circumstances disagreement, the issue positions of each CA, and CA contacts to the CRA and IRS Appeals Official for their consideration prior to the opening Appeals Review Panel conference.

    1. While the Appeals Review Panel is a government-to-government process, the Panel may request supplementary information/representation from any party possessing relevant information.

    2. IRS Appeals Review Panel members must not disclose their processes or findings to subject taxpayer of a specific MAP case, the taxpayer’s representatives, or any persons other than the CAs.

    3. Subject taxpayer of a specific MAP case, the taxpayer’s representatives, and the CAs are not allowed ex parte contacts with Appeals Review Panel members unless requested to do so by the Panel.

    4. If any ex parte contact occurs with an IRS Appeals Review Panel member, the Panel member must immediately disclose the contact to the CRA and IRS Appeals Officials.

  6. If an Appeals Review Panel requires face-to-face discussions, meetings are held in Ottawa or Washington, D.C. on an alternating basis.

  7. The targeted time frame for an Appeals Review Panel to conclude work and render a decision is 150 calendar days from the date a referral request is required or agreed to. The Appeals Review Panel may ask the CAs to extend the 150-day time frame. Either CA may unilaterally grant an extension.

  8. If an issue is resolved during the Appeals Review Panel, the decision is incorporated into a joint written report submitted to the CAs (see Section 3 below).

  9. For simultaneous Appeals and CA requests under Section 8 of Rev. Proc. 2006-54, the taxpayers are informed that if the CAs fail to agree or the taxpayers do not accept the mutual agreements reached, the taxpayers are permitted to refer the issue to IRS Appeals for further consideration in the administrative process.

8.7.3.7.3.2  (08-10-2007)
Appeals Review Panel Decisions

  1. If a facts and circumstances issue is resolved during an Appeals Review Panel process, a joint written report is prepared. The Panel report -

    1. Identifies the MAP case.

    2. Summarizes the issues causing factual disagreement.

    3. Provides the decision regarding underlying facts and circumstances in dispute.

    4. Is signed by the CRA and Appeals Officials.

  2. The Appeals Review Panel sends a copy of the Panel report to the CAs.

  3. The CAs follow the decision of the Appeals Review Panel regarding their findings in respect of the underlying facts and circumstances of the specific MAP case.

  4. If a facts and circumstances issue is not resolved, the IRS Appeals Official prepares a brief ACM and the CRA Official prepares a summary of its findings. Both documents are forwarded to the CAs.

    1. IRS Appeals will not share the ACM with the taxpayers.

    2. Unless the CAs agree otherwise, no members of the Appeals Review Panel may participate in any subsequent resolution of the subject MAP case.

  5. Established Appeals closing procedures are followed for a CA work unit. The Appeals Official prepares Form 5402, Appeals Transmittal and Case Memo, Appeals Review Panel Report, and includes the following information in "Remarks" :

    1. A statement saying, "This is a Competent Authority Case under MEMORANDUM OF UNDERSTANDING BETWEEN THE COMPETENT AUTHORITIES OF CANADA AND THE UNITED STATES REGARDING FACTUAL DISAGREEMENTS UNDER THE MUTUAL AGREEMENT PROCEDURE dated June 3, 2005."

    2. Applicable closing code: 14 – Fully Resolved; 15 – Not Resolved; 16 – Partially Resolved; or 20 – Withdrawn for Procedural Reasons.

  6. Appeals Officials and team members use ACDS to track cases. Closed office file are mailed to the Appeals Fast Track Settlement Program Manager for centralized filing.

8.7.3.8  (10-01-2012)
Controlled Issues

  1. The authority to resolve some issues is limited to certain Service employees. Information on the controlled issue is found in the delegation order which brought about the control.

Exhibit 8.7.3-1 
Sample Outline for Appeals Settlement Guidelines

APPEALS SETTLEMENT GUIDELINES
TITLE OF ISSUE
STATEMENT OF ISSUE
COMPLIANCE POSITION
INDUSTRY/TAXPAYER POSITION
DISCUSSION
(Use subtitles as needed. For example:
• Background
• Facts
• Legal Analysis, etc.)
 
SETTLEMENT GUIDELINES

Exhibit 8.7.3-2 
Signature Page for the Appeals Settlement Guidelines

APPEALS  
DOMESTIC OR INTERNATIONAL OPERATIONS
(whichever applicable)
 
APPEALS SETTLEMENT GUIDELINES  
ISSUE:    
TECHNICAL SPECIALIST(S):    
TELEPHONE:    
UIL NUMBER:    
FACTUAL/LEGAL ISSUE:    
APPROVED: __________ _____
  Director, Domestic Operations (or) Director, International Operations DATE
  __________ _____
  Director, Specialty Operations DATE
EFFECTIVE DATE: date when signed  

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