4.46.5 Resolving the Examination

Manual Transmittal

March 09, 2016

Purpose

(1) This transmits revised IRM 4.46.5, LB&I Examination Process, Resolving the Examination.

Scope

Not all examinations are the same in scope, size, and complexity; therefore, portions of this IRM may be more applicable to some cases than others.

Material Changes

(1) Rewrote and streamlined this IRM to incorporate the issue-driven examination as described in Publication 5125, LB&I Examination Process.

(2) Included discussions on issue resolution, factual development, applying the law to the facts, and interpretation of the law in IRM 4.46.5.2.

(3) Modified and included changes to Appeals working with Exam including new Appeals policy and new statute requirements.

(4) Clarified subsection 4.46.5.4.2.3 on Accelerated Issue Resolution (AIR).

(5) Removed obsolete subsection 4.46.5.6, Settlement Authority, and renumbered subsequent subsections.

(6) Included the new dissent procedures for disagreements with Appeals determinations.

(7) All references to "Technical Advisors (TA)" were removed.

(8) All references to LB&I Compliance Issues labeled as "Tier I, Tier II or Tier III" have been removed.

(9) All references to Rev. Proc. 2000-43 on ex parte communications with Appeals were updated to Rev. Proc. 2012-18.

(10) Editorial corrections made throughout.

(11) Material from IRM 4.46.7 has been modified and included in this IRM as follows:

IRM 4.46.7 cite Title New IRM cite
4.46.7.2 Closing a Case 4.46.5.10
4.46.7.2.1 Completing the Examination 4.46.5.7
4.46.7.2.2 Partial Closings 4.46.5.10.1
4.46.7.2.3 Files and Workpapers 4.46.5.10.2.1
4.46.7.2.4 Review of Case 4.46.5.8
4.46.7.2.4.1 Assistance from PFTG-LQMS 4.46.5.8.1
4.46.7.2.5 Forwarding for Appeals Actions 4.46.5.7.4
4.46.7.2.6 Closing Actions 4.46.5.10.2
4.46.7.2.6.1 Closing Agreements - Process 4.46.5.6
4.46.7.2.7 Conference with Appeals 4.46.5.11
4.46.7.2.7.1 Procedures for LB&I Cases 4.46.5.11.1
4.46.7.2.7.2 Requesting a Pre-Conference 4.46.5.11.2
4.46.7.2.7.3 Participation in Pre-Conference 4.46.5.11.3
4.46.7.2.7.4 Other Communications with Appeals 4.46.5.11.4
4.46.7.2.7.5 Applications to Docketed Cases 4.46.5.11.5
4.46.7.2.7.6 Post-Settlement Conference 4.46.5.14
4.46.7.2.7.7 Direct Examination Time for Conference Procedures 4.46.5.14.1
4.46.7.2.7.8 Dissent Procedures for Disagreements with Appeals Determinations 4.46.5.15
4.46.7.3 Assessment of Team Members Performance 4.46.5.16
4.46.7.3.1 Performance Assessment 4.46.5.16.1
4.46.7.4 Post-Examination Management Critique 4.46.5.17
4.46.7.4.1 Post-Examination Critique Objectives 4.46.5.17.1
4.46.7.4.2 Critique with the Examination Team 4.46.5.17.2
4.46.7.4.3 Scope of Critique 4.46.5.17.3
4.46.7.4.5 Critique with Taxpayer 4.46.5.17.4
4.46.7.4.6 Documentation of Post-Examination Critique 4.46.5.17.5
4.46.7.4.7 Carryover Adjustment Schedule 4.46.5.9.2.1
4.46.7.4.8 Recurring Issues 4.46.5.9.2
4.46.7.4.9 Disposal of Critique 4.46.5.17.5
Exhibit 4.46.7-2 Agenda for Post-Examination Critique Exhibit 4.46.5-1

Effect on Other Documents

IRM 4.46.5 dated July 22, 2011 is superseded.

Audience

All LB&I personnel

Effective Date

(03-09-2016)

Susan L. Latham
Director, Program and Business Solutions (PBS)
Large Business and International Division

Overview

  1. The goal of the resolution phase is to reach a mutual agreement on the tax treatment of each issue examined at the earliest appropriate point in the examination in a quality manner. The taxpayer and LB&I will benefit in terms of resource utilization and tax certainty when the parties have open and meaningful discussions of issues throughout the examination process. Early and frequent issue team discussions and presentation of all relevant facts are crucial for a complete understanding of the taxpayer’s and government’s tax positions and their relative strengths and weaknesses.

  2. The issue manager, in collaboration with the case manager, will lead the issue team in resolving issues utilizing appropriate issue resolution tools. Expeditious issue resolution necessitates open communication, cooperation and collaboration among issue team members. Issue exit strategies should consider recurring and carryover issues to provide certainty for the government and the taxpayer.

Issue Resolution

  1. Each issue should be developed giving the taxpayer an opportunity to agree or disagree with the findings. For an issue to be resolved there must be an open discussion by the issue team in these three areas: factual development , the law that applies to the facts and each party's interpretation of the law.

Factual Development

  1. In order to apply the facts to the law, all relevant facts must be identified.

  2. Present the relevant facts in a clear and effective manner.

  3. Distinguish between facts and opinions. The facts are not to include opinion, personal inferences, biases or prejudices.

  4. Document the evidence relied upon to reach the factual conclusion of a given transaction in a clear and understandable manner.

  5. It is the taxpayer’s responsibility to ensure all relevant facts have been identified and presented to support the tax position taken on the return. It is imperative that the issue team discuss the facts gathered to understand each other’s position.

  6. Appeals may return the case to exam if new information is presented during the Appeals process. See IRM 8.7.11.5.3.

  7. An acknowledgment of the facts must be documented in the case file for all unagreed issue(s). Any disputed facts should also be noted. The issue team should work together to develop and reach a common understanding of the relevant facts. To effectively apply the law, all of the fact must be clear and accepted by both parties. (See IRM 4.46.4, Executing the Examination, for the process of obtaining the acknowledgment of the facts)

Application of the Law

  1. Apply the law to the facts in a fair and impartial manner.

  2. Open and transparent discussions will aid in reaching an understanding of each other's views when identifying the appropriate laws.

  3. If the appropriate laws are clear based on the set of facts, then application of the law is straightforward. However, if the laws are unclear, the issue team must weigh the various legal authorities and other guidance to determine the merits of the issue.

  4. Refer to IRM 4.10.7.2. Researching Tax Law, which provides the most common, but by no means all, research resources available when applying the law.

Interpretation of the Law

  1. The issue team must apply judgment and experience in weighing the taxpayer’s and government’s tax position, based on the applicable laws, when resolving the issue.

  2. The issue team must discuss the interpretation of the law, based on the facts presented, to reach an understanding of the taxpayer’s and government’s position.

Resolution vs. Settlement

  1. Resolution: LB&I managers have the broad authority to resolve issues based upon the application of tax law to the facts. Other issue resolution tools, as outlined below, should be used to resolve issues when appropriate.

  2. Settlement: Appeals has the authority to settle cases based upon hazards of litigation. For example, when there is uncertainty in the event of litigation, as to how a Court would interpret and apply the law or weigh the facts, Appeals utilizes techniques such as "mutual concession" and "split issue" settlements. Exam is not authorized to use these settlement techniques.

    Note:

    There are various delegation orders available for settlement of issues at the examination level. See IRM 1.2.43.

Issue Resolution Tools

  1. Consideration and utilization of issue resolution tools can start at the earliest appropriate point and continue until the case is closed from examination jurisdiction. Using appropriate issue resolution tools can potentially reduce examination time, save resources and lessen the burden on both parties. LB&I encourages the use of issue resolution strategies. Refer to IRWeb for more information regarding the following resolution options and procedures.

Taxpayer-Specific Pre-Filing Resolution Tools

  1. Taxpayer-specific pre-filing resolution tools include: Pre-Filing Agreements (PFA), Advanced Pricing Agreements (APA), Compliance Assurance Process (CAP) and Private Letter Rulings.

Pre-Filing Agreements
  1. Pre-Filing Agreements (PFA) permit a taxpayer to request the examination of specific issues relating to a tax return before the return is timely filed. The purpose is to resolve issues involving factual questions under well- settled principles of law. A PFA can often resolve such issues more effectively and efficiently. A PFA also provides the taxpayer with a greater level of certainty regarding the examined issue at an earlier point in time than a post-filing examination. The request is subject to a user fee. For more information see Rev. Proc. 2009-14 and the PFA web page at http://lmsb.irs.gov/hq/pftg/pfts/pfa/preagree.asp.

Advanced Pricing Agreements (APA)
  1. Advanced Pricing Agreements (APA) is a process that provides for determining the proper treatment of transfer pricing issues prior to the filing of returns. In some circumstances the agreed application methods for resolving the transfer pricing issue may also be used to resolve issues present on filed returns currently under examination. For more information see Rev. Proc. 2015-41 or successor and the APA web page at http://lmsb.irs.gov/international/dir_treaty/treaty/index.asp.

Compliance Assurance Process (CAP)
  1. Compliance Assurance Process (CAP) is a method of identifying and resolving tax issues through open, cooperative and transparent interaction between the IRS and LB&I taxpayers prior to the filing of a return. Through the CAP program, the taxpayer should achieve tax certainty sooner and with less administrative burden than conventional examinations. CAP is a voluntary program for taxpayers. Taxpayers must apply and be accepted into CAP. For more information see the CAP web page at http://lmsb.irs.gov/hq/pftg/CAP/index.asp and IRM 4.51.8.

Private Letter Rulings
  1. Private Letter Rulings are written rulings issued by National Office Chief Counsel that apply the tax laws to a taxpayer's specific set of facts. A written ruling is subject to a user fee, issued based on the taxpayer’s request, on proposed or completed transactions prior to the filing of the return. The identical issue cannot be on an earlier return that was examined in Appeals or in litigation. For more information see Rev. Proc. 2015-1 or the first revenue procedure of the current year.

Taxpayer-Specific Post-Filing Issue Resolution Tools

  1. Taxpayer-specific issue resolution tools include: Technical Advice Memorandums, Delegation Orders, Accelerated Issue Resolution, Early Referral to Appeals and Fast Track Settlement.

Technical Advice Memorandums
  1. Technical Advice Memorandums are written statements issued by National Office Chief Counsel on technical or procedural questions on the proper application of tax law, treaties, regulations, etc. on a specific set of facts submitted by the IRS and/or taxpayer in a written request. See the TAM web page athttp://lmsb.irs.gov/hq/pftg/pfts/downloads/tams/tams.asp and Rev. Proc. 2015-2 or the second revenue procedure of the current year.

Delegation Orders
  1. Case managers should look to applicable delegation orders for potential issue resolution tools. See IRM 1.2.43.22 and IRM 1.2.43.23 for applicable delegation orders.

  2. Area Counsel should be included in all aspects of resolution discussions.

Accelerated Issue Resolution (AIR)
  1. Accelerated Issue Resolution (AIR) is an examination process to apply the resolution of the same or similar issues arising for an examination of an LB&I taxpayer from one or more tax periods to other tax periods.

  2. Issue teams are to refer to Rev. Proc. 94-67 and Rev. Proc. 68-16 when considering the utilization of AIR procedures.

    1. AIR does not include settlement authority for managers.

    2. AIR does not alter in any way the authority case managers have to resolve issues.

    3. Counsel assistance is mandatory when using AIR.

    4. An AIR agreement is generally limited in scope to issues on filed returns arising from an audit of specific taxpayers under the jurisdiction of the Director of Field Operations. Certain issues are excluded or require additional approvals. See Rev. Proc. 94-67, SECTION 3, SCOPE OF AN AIR AGREEMENT

    Note:

    For non-filed years, a taxpayer should request a Pre-Filing Agreement (PFA). See http://lmsb.irs.gov/hq/pftg/pfts/pfa/preagree.asp.

Executing an Agreement
  1. The AIR process uses either a Closing Agreement, Form 906 or standard partial and/or full agreed deficiency procedures. See IRM 8.13.1, Closing Agreements or Procedures for Requesting Partial or Manual Assessments, athttp://lmsb.irs.gov/hq/pqa/3/Case_Closing/Partial_&_Manual_Assessments_Procedures.asp for procedures.

  2. Delegation Order 8-3 (formerly DO-97, Rev. 34) delegates authority for closing agreements concerning internal revenue tax liability in cases under examination jurisdiction (but excludes cases docketed before the United States Tax Court). See IRM 1.2.47.4.

  3. A closing agreement can cover the entire tax liability or a year or years, or be limited to a specific tax item.

Case Control
  1. Although the AIR process does not constitute a formal examination of the taxpayer’s books and records, examiners should follow normal procedures for the control of tax periods on the Audit Information Management System (AIMS).

  2. The AIR process should be limited in examinations where it is not practical to include subsequently filed tax return years as part of the current examination cycle.

  3. If the AIR process includes subsequently-filed years, per IRM 8.13.1.4.1.1, the case manager:

    1. Should establish sufficient controls to ensure that needed follow-up actions are taken with respect to all the terms of closing agreements affecting or relating to tax liability for later unexamined (or future) periods or related entities

    2. Should consider utilizing Information Report procedures

    3. Should take whatever action is needed to facilitate follow-up

  4. AIR does not affect Policy Statement P-4-5 for subsequent years included in the AIR agreement but not examined. (See Policy Statement P-4-5 at IRM 1.2.13.1.3.)

Payments
  1. When closing agreements are executed the examiner should attempt to secure and process payments for both examined and non-examined years.

  2. Submit payments and Form 3244-A with Form 3210 to the designated Submission Processing Center. See http://lmsb.irs.gov/hq/pqa/downloads_PFA/LargeDollarRemittances.asp.

    1. The newest revision of Form 3244-A contains a check box on the form to designate a payment as a IRC 6603 deposit.

    2. If you are completing the form on the publishing website and check the 6603 box, the form will automatically populate with Designated Payment Code (DPC) 12, Cash bond credit / 6603 deposit.

    3. If you are hand writing the form, manually enter DPC 12.

  3. Record the amount under TC 640, Advance Payment on Deficiency. The TC 640 will freeze the refund.

  4. The examiner is responsible for monitoring the posting of the TC 640 payment to verify the full amount was paid.

Returns and Files
  1. An executed original of the closing agreement will be mailed to the taxpayer (or to the representative) with Letter 1995-E.

  2. Along with the procedures identified in IRM 8.13.1.4.5, examiners are to place a copy of the following documents in the case:

    1. Letter 1595-E , inside the case folder on the top right side

    2. Form 3244-A and a copy of the check on front of the return or BRTVUE

    3. Form 906, back of return or BRTVUE (face in)

    4. Transcripts with the TC640 posting (if applicable), back of return or BRTVUE (face out)

Early Referral to Appeals
  1. Early Referral to Appeals is a process to resolve cases more expeditiously through LB&I and Appeals working simultaneously. Appeals can consider a fully developed unagreed issue while exam is developing other issues. This process is optional and may be requested by the taxpayer or the examiner. An early referral may be requested on one or more unagreed issues.

  2. Rev. Proc. 99-28, 1999-2 C.B. 109, sets forth the procedures to request early referral. More information can be found at IRM 8.26.4 , Early Referral Procedures or on the Appeals web site at http://appeals.web.irs.gov/tech_services/adr/early-referral.htm.

Fast Track Settlement (FTS)
  1. FTS must be considered for all unagreed issues. The program is not right for every situation, but when properly applied, it can save significant time and administrative burden for the service and the taxpayer. Issues should be fully developed prior to consideration of FTS. A fully developed case is one without any significant unresolved factual differences.

  2. FTS is a collaborative effort where the taxpayer, the LB&I members of the issue team and Appeals agree to participate and work toward a mutual resolution based on an agreed set of facts.

    Note:

    All examiners must provide Pub. 4539, Fast Track Settlement brochure to the taxpayer at the opening interview and discuss the program with the taxpayer.

  3. FTS is designed to utilize the mediation skills and designated settlement authority of Appeals to resolve issues while the case is still in the examination cycle.

  4. Appeals acts as a facilitator to arrive at and execute a resolution/settlement that is mutually agreed upon by both the taxpayer and the LB&I issue team.

  5. Ex Parte communication prohibition does not apply to communications arising in the FTS process, because Appeals personnel are not acting in their traditional settlement role.

  6. Documentation that fast track settlement was considered will be recorded in the case file.

  7. Rev. Proc. 2003-40, 2003-1 C.B. 1044, sets forth the procedures for requesting FTS. More information can be found on the Appeals web site at http://appeals.web.irs.gov/tech_services/adr/fasttrack-lbi.htm and on the LB&I FTS web site at http://lmsb.irs.gov/hq/pqa/Post-filing/pfa_fast_track_home.asp.

Generic Issue Resolution Tools

  1. Generic Issue resolution tools include: Industry Issue Resolution (IIR), LB&I Administrative Guidance and LB&I Published Guidance Recommendations.

Industry Issue Resolution (IIR)
  1. Industry Issue Resolution (IIR) is a process that involves frequently disputed/burdensome business tax issues common to a significant number of taxpayers. The focus is on resolving issues arising in future years. The process will likely result in the issuance of published guidance in the form of a revenue procedure or revenue ruling. A request for guidance can be submitted at any time. For more information see the Industry Issue Resolution web page athttp://lmsb.irs.gov/hq/pftg/pfts/iir/iir.asp..

LB&I Administrative Guidance
  1. LB&I Administrative Guidance (issued as directives) provides operational instructions for planning and conducting examinations in areas of unsettled law. See the LB&I Administrative Guidance web page at http://lmsb.irs.gov/hq/pftg/pfts/adminguidance/admin.asp for more information.

LB&I Published Guidance Recommendations
  1. LB&I Published Guidance Recommendations focus on both resolving issues arising in future years and under examination. Issue recommendations are submitted through LB&I Counsel for inclusion in the Guidance Priority List (GPL). The GPL sets forth guidance that the Service intends to issue from July 1 through June 30 of the following year. See Process for Recommending LB&I Issues for Published Guidance web page at http://lmsb.irs.gov/hq/pftg/pfts/OtherPrograms/PublishedGuidance.asp for more information.

Management Involvement in the Issue Resolution Process

  1. The issue manager is responsible for resolving the issue at the earliest appropriate point using an appropriate resolution tool.

  2. The issue manager should collaborate with the case manager when resolving the issue with the taxpayer and keep the issue team apprised of the status of the issue resolution.

  3. Any differences among managers regarding the resolution of the issue should be elevated to their respective managers.

  4. Issue manager must review and approve the NOPAs before issuance to the taxpayer. Approval should be documented in the case file. The case file should document all meaningful efforts by both the issue manager and the case manager to resolve issues.

  5. The NOPA will be shared and discussed with the taxpayer upon issuance. A management conference will be held as needed.

  6. The issue manager will engage in a collaborative discussion with the taxpayer when a timely response to the NOPAs has not been received.

  7. The taxpayer has the option to agree or disagree with the NOPA presented. If agreement is reached, ask the taxpayer to approve and sign the Form 5701.

    Note:

    The status and taxpayer’s position should be updated in IMS.

  8. If taxpayer does not agree with the NOPA as presented, the issue manager should:

    1. Determine which aspects of the issue may be agreed and which aspects are unagreed.

    2. Determine the strengths and weaknesses of each side’s tax positions.

    3. Use issue resolution tools to assist in the resolution of the unagreed issue.

    4. Must consider Fast Track as an issue resolution tool.

    5. Begin unagreed procedures, if an agreement cannot be reached.

    6. Support the Appeals pre-conference.

  9. The issue manager is responsible for review and approval of the LB&I issue team’s rebuttal to the taxpayer's protest to ensure that all arguments raised in the protest are fully addressed.

Closing Agreements

  1. Treas. Reg. 301.7121-1(a) provides that a closing agreement may be entered into in any case in which there appears to be an advantage in having the case permanently and conclusively closed, or if good and sufficient reasons are shown by the taxpayer for desiring a closing agreement and it is determined by the Commissioner that the United States will sustain no disadvantage through consummation of an agreement.

  2. IRM 8.13.1, Closing Agreements, provides instructions and prescribes procedures for Service personnel handling closing agreements entered into under IRC 7121.

  3. IRM 8.13.1 contains a number of examples of closing agreements. The LB&I issue team should be able to effectively prepare a customized closing agreement based on the particular fact pattern unique to the issue(s) being resolved after consulting this section and Area Counsel.

  4. A closing agreement terminates an existing Form 872A (Special Consent to Extend the Time to Assess Tax) if language in the agreement could be construed to be the final determination of tax and final administrative Appeals consideration. It is important that a Form 906, Closing Agreement on Final Determination Covering Specific Matters, be used to limit the agreement to only those issue(s) that are being resolved. The closing agreement should specifically state that the agreement is not a final determination of tax and final administrative Appeals consideration of any remaining issues.

  5. Deputy Commissioner, International must provide concurrence on cases which U.S. competent authority assistance has been requested, or is intended to be requested, under Rev. Proc. 2015-40 or successor, and on closing agreements that provide relief under Rev. Proc. 65-17 (as amended) or Rev. Proc. 99-32 for issues involving allocations of income under IRC 482.

Closing Agreement - Joint Committee Aspects

  1. The examination issue team, with Area Counsel’s assistance, is responsible for preparing the closing agreement. However, closing agreements involving any Joint Committee jurisdictional years should not be signed by or on behalf of the Service until the case manager is notified by the Joint Committee Specialist Group that the Joint Committee’s views have been received and considered. IRM 4.36.3.6.2 provides guidance for requesting Joint Committee review of closing agreements. These procedures should also be referred to where issues are resolved early in the examination process, such as through Fast Track Settlement or Early Referral to Appeals.

  2. Closing agreements on Joint Committee cases, including those based on Competent Authority determinations, must not be executed on behalf of the Government until reviewed and cleared by the Joint Committee on Taxation. See IRM 4.36.4.7.

  3. If a resolution is reached on an issue near the completion of the LB&I examination, the closing agreement should be submitted with the Revenue Agent’s Report to the local Joint Committee Coordinator for preparation of the Joint Committee Report.

  4. If a resolution is reached on an issue near the beginning of the LB&I examination, there could be substantial delay in executing the closing agreement if the closing agreement is not reviewed by the Joint Committee until the examination is completed. In this situation:

    1. The case manager should consider asking the Joint Committee Refund Counsel to review the issue.

    2. Assuming the Joint Committee Refund Counsel raises no objection, the closing agreement may then be executed by or on behalf of the Service. The examiner should refer to IRM 4.36.3.6.2 for further guidance in situations where an issue is resolved early in the examination, such as through Fast Track Settlement or Early Referral to Appeals.

Closing Agreements - TEFRA Partnership Considerations

  1. Due to the complexities in attempting to resolve TEFRA partnership issues and the technical administrative procedural requirements involved in processing, closing agreements must be thoroughly vetted through senior management and Counsel.

Completing the Examination

  1. In the issue-based approach teams and/or members within a team may complete their role at different points in the issue/case timeline. Upon the completion of any examiner's assignment, that team member should:

    • Discuss the issue with the issue manager and case manager to obtain concurrence

    • Discuss any pending proposed issues with the issue team depending upon the communications agreement and instructions to issue team members established during planning

    • Complete their portion of the examination report

Types of Examination Reports Based on Agreement

  1. See IRM 4.46.6 for workpaper and report guidelines. The following are the different types of reports that are issued to close a case from Exam:

    • No-change report - Report is issued when there are no adjustments and the return is accepted as filed. Most LB&I IC examinations resulting in no change with no adjustments and disposal code 02, do not require a "no-change" report. See IRM 4.46.6.5.1, No-Change Examination (Disposal Code 02) Procedures.

    • No-change with Adjustments Affecting Other Tax Years Report - Report is issued if the adjustment results in no-change to the current year's tax, yet they affect other tax years that are not under examination.

    • Agreed Report - this report is issued when the taxpayer agrees with all the issues.

    • Unagreed Report - The report contains unagreed issues that the taxpayer has taken exception to in the issue team’s findings. Prepare unagreed report and if sufficient time remains on the statute issue Letter 950-Z (30-day letter). If a consent is solicited and not received to enable the issuance of a 30-day letter a statutory notice of deficiency may need to be issued.

    • Partially-Agreed Report - This report is issued when the taxpayer agrees to some, but not all issues. In this instance the exam team will prepare two reports, one for the agreed portion and the other will reflect the unagreed issues.

Key Points to Consider and Verify in Preparing an Unagreed Issue Report

  1. Report Clarity and Logic - review to ensure the following:

    • The report is clear, concise and presented in a logical order

    • The issue statement is straightforward and easy to read

    • All relevant factual information is clearly documented in the examiner’s report

    In addition,

    • Proof for typographical and grammatical issues

    • Include schedules and other supplemental information that are essential for Appeals

    • See IRS Plain Writing Toolkit for more information about using plain language

  2. Report Elements - review to ensure the following:

    • The unagreed report provides the issue, facts, law and arguments, taxpayer’s position and conclusion

    • The report clearly presents the issue(s), the proposed adjustment amount(s) and the reasons for the adjustment(s)

    • The issue team secures acknowledgment to facts prior to closing the unagreed issue to Appeals

    • All additional and disputed facts have been appropriately addressed and documented

      Caution:

      Appeals may return the case to exam if new information is presented to Appeals. See IRM 8.7.11.5.3. The process of securing the acknowledgment to facts from the taxpayer must be documented in the case file. See IRM 4.46.4.9 for documentation for acknowledgment to facts.

    • Ensure The Service’s position is adequately substantiated based on the tax law

    • The pertinent legal arguments and current legal citations are included

    • The report addresses the taxpayer’s position

  3. Statute of Limitations: Before a 30-day letter is issued there must be sufficient time remaining on the statute to allow the taxpayer to respond, the protest to be addressed and sufficient processing time to ensure that the statute will have at least 365 days (one year) remaining when the case is received in Appeals. See IRM 25.6.23.8.1.

    Caution:

    Because of the extra processing time needed for TEFRA procedures, Technical Services requires at least 600 days on the assessment statute for unagreed TEFRA key entity cases going to Appeals. The 600 days includes the 365 day Appeals requirement. See http://tefra.web.irs.gov for more information.

  4. The case manager has responsibility for the preparation and delivery of the 30-day letter to the taxpayer. See IRM 4.10.8.13.4 for guidance on form letters. 30-day letters will be expeditiously prepared and mailed in accordance with existing procedures. The case will be included in the 30-day letter suspense files at the group level and updated to status 13 on ERCS after the mailing of the 30-day letter to the taxpayer.

  5. The taxpayer may request an extension of time in which to file a protest; before it is granted, determine if a statute extension should be solicited to ensure adequate time to address the protest and still meet the remaining time on the statute requirements set by Appeals. The case manager, in collaboration with the issue manager(s), may approve the request based on the facts and circumstances in each case. Letter 686 may be used for this purpose.

  6. Taxpayer's Protest: Ensure the protest is in accordance with IRM 4.10.8.13.

  7. Rebuttal - review to ensure the following:

    • The issue team prepares a rebuttal on the unagreed issue.

    • The rebuttal addresses/resolves factual differences between the protest and audit report.

    • The rebuttal addresses any new arguments or legal positions presented by the taxpayer.

    • The rebuttal should have the same clarity and logic as stated in paragraph (1) above.

  8. TEFRA:

    • If the unagreed case is TEFRA, see IRM 25.6.23.8.1.

    • If the case is a key TEFRA case, ensure the PCS linkage requirements for investors has been completed See IRM 4.31.2.6.

  9. Other Issues:

    • Ensure claims and other affirmative issues are addressed. See IRM 4.10.8.9.

    • If the case is Joint Committee, ensure requirements for "minimum refund" have been properly considered. See IRM 4.36.3.7.1.

30-Day Letter Follow-up

  1. If resolution of the issue(s) is reached and the case is now agreed, payment will be solicited and the case will be processed as agreed.

  2. If the issue(s) on the case remain unagreed, the taxpayer will submit a protest letter. The following actions will be completed when a protest is received from the taxpayer by the issue team:

    1. Thoroughly review taxpayer’s protest and address each of the arguments presented in the protest. Also, address all new facts and legal references the taxpayer puts forth.

    2. The adequacy of the protest and its compatibility with the examiner’s report must be considered. All discrepancies and factual differences should be reconciled and resolved before the case is transmitted to Appeals. Appeals may return the case or consult LB&I Examination on an issue. See IRM 8.7.11.5.3 for explanation of those situations.

    3. Additional facts may arise during the protest process and/or new issues or legal arguments may be raised. If the information received after issuance of the 30-day letter changes the proposed tax, the Team Coordinator will issue a revised report with the assistance from the TCS.

  3. The LB&I issue team will prepare a rebuttal to the protest if new information or issues were raised in the protest. The rebuttal is not intended to restate positions taken in the RAR or Transmittal Letter. The protest may include new information not previously brought to light. The new information will be appropriately considered to ensure complete development prior to Appeals consideration. Area Counsel and subject matter experts are available to assist in analyzing and responding to new information or issues raised in the protest.

  4. The LB&I issue team will share the rebuttal with the taxpayer prior to forwarding the case to Technical Services. Such information could help in resolving the case. A copy of the rebuttal will also be included in the administrative file with the protest.

  5. Information of a confidential nature should not be incorporated in the rebuttal, but may be included in the Transmittal Letter (Form 4665, Report Transmittal) or discussed with Appeals during the pre-conference (following ex parte rules). Keep in mind that a copy of the Transmittal Letter must be shared with the taxpayer if it includes statements or comments intended to influence Appeals’ decision-making process. See Rev. Proc. 2012-18 § 2.03(4).

  6. In closing the case to Appeals, the transmittal letter (Form 4665, Report Transmittal), must note that the Form 886-A submitted fully addresses each argument put forth by the taxpayer and the issue team’s responses to each argument. The transmittal letter should also document the issue team’s process of securing acknowledgment to the facts and any disputed facts and the results thereof.

  7. If a protest is not received, a Statutory Notice of Deficiency (90-day letter) will be issued.

Forwarding for Appeals Action

  1. The case manager should forward the entire group of related entities in the case simultaneously to Appeals.

  2. The Appeals office serving the taxpayer is responsible for consolidating all cases in the group. Appeals may request assistance in the following ways:

    1. Provide background information (if needed)

    2. Provide that part of the examination plan which contains a capsule history of the taxpayer

    3. Provide information on how workpapers are organized

    4. Prepare a concise synopsis of the overall case (if requested)

Appeals Acceptance Procedures

  1. The team coordinator and case manager should be aware of circumstances in which Appeals will not accept a case from LB&I. Refer to IRM 8.2.1.5 for list of possible circumstances.

Review of Case

  1. The case manager is responsible for reviewing the primary case and all effectively controlled entities that are included in the examination.

  2. Issue managers are required to perform a review of the technical/mathematical accuracy and issue development/documentation for their assigned issues.

  3. Managers of specialty groups such as Employment Tax, Excise Tax or TEGE will be responsible for the technical/mathematical accuracy and issue development/documentation of any separate specialty reports issued.

  4. Joint Committee refund cases must be processed as outlined in the Joint Committee Procedures (See IRM 4.36).

Quality Case Reviews

  1. LB&I Quality Measurement System (LQMS) case reviews are completed by Quality and Special Projects (QSP) reviewers. Cases for review are randomly selected according to a statistically valid sample that is determined on an annual basis. The LQMS review process and results are a part of the Balanced Measurement System, which measures customer satisfaction, employee engagement and business results.

  2. The integrity, independence and objectivity of the reviewer must be preserved. Reviewers must not vary from regular procedures by orally resolving issues.

  3. A case specific advisory memoranda will be issued to all examiners and specialists whose work product has been reviewed. Case quality scores will not be included. An advisory memoranda will be distributed electronically to examiners or specialists and their manager. Examiners or specialists who have questions concerning the contents of a memorandum may submit inquiries electronically to the address the advisory memorandum transmitted and a reply will be provided by QSP. If there is a serious disagreement with the results of the review between the reviewer or review team and examiner or examination team, the examiner or exam team will have the right to elevate the disagreed issues.

  4. LQMS results are not to be used to evaluate the performance of an individual employee or team. Upon receipt of the advisory memorandum, the manager will discuss, as appropriate, its contents with the employee. Unless the employee provides their manager with a written or email request that a copy of the memorandum be retained in his/her Employee Performance File, all copies of the memorandum will be disposed of by the manager no later than (45) days after the issuance date.

  5. The case manager is responsible for reviewing the case for compliance with LB&I auditing standards prior to closing the case.

Exit Strategies

  1. During the resolution phase, examiners are encouraged to engage in discussions with the taxpayer in an effort to resolve tax controversy, so that LB&I and the taxpayer have tax certainty. Recommendations should address the future tax treatment of issues. This can result in significant resource savings as it relates to carryover and recurring issues. The following subsections describe factors to consider in developing ways to resolve tax controversy.

Closing Agreements - Process

  1. A Form 906, Closing Agreement on Final Determination Covering Specific Matters, must be signed and filed in triplicate. All copies must have the original signatures. DFO approval signature is required for a closing agreement.

  2. Upon approval of the Closing Agreement, the original copies are processed in the following manner:

    1. One original copy should be sent to the taxpayer. This action should be recorded (e.g. keep a copy of the transmittal letter in the files, notate the activity record, etc.).

    2. Attach one original copy to the last examined return in the file covering a year to which the agreement pertains ( with the top of the form affixed such that one can see the printed "Form 906" notation). Write in red on the top margin on all of the other returns “SUBJECT TO FORM 906 CLOSING AGREEMENT ATTACHED TO 20XX RETURN”.

    3. One original copy should be sent to the DFO having jurisdiction over the taxpayer. The DFO should maintain a folder for Closing Agreements.

Recurring Issues

  1. A recurring issue is an issue that has been resolved in the current cycle and continues into subsequent filed returns and/or returns that have not yet been filed. For optimizing resource utilization, the issue team should plan on how that issue could be addressed in any filed returns and when possible reach agreement that the taxpayer will handle the issue properly going forward.

  2. In order to minimize burden to the taxpayer and LB&I, discussions to resolve recurring issues are necessary. A joint critique of the exam process may also be performed to recommend improvements. Recommendations should address the future tax treatment of issues to eliminate recurring issues. The following should be addressed for all recurring issues:

    • Identify and discuss all agreed recurring issues.

    • Develop a strategy that could result in agreement with the taxpayer to eliminate the recurring issue(s).

    • If the recurring issue is inadequate records, the taxpayer should be advised in writing relative to the areas where the accounting procedures or practices are inadequate or need to be changed. The letter should be from the Industry Director and should be directed to the principal corporate officer responsible for taxes. See IRM 4.10.8.17.

    • Consider appropriate penalties when the examination of returns filed subsequent to the receipt of the inadequate records notice indicate the taxpayer failed to correct the procedures or practices.

  3. For complex tax computations recurring in nature, a reasonable estimate may be used for the RAR with the understanding that exact amounts will be computed and used in all subsequently filed tax returns when possible.

    Example:

    The IRS and taxpayer agree to a methodology to approach the examination of an issue that would save significant resources achieving voluntary compliance for filed and unfiled tax periods.

  4. Accounting method issues may be delayed until a subsequent examination cycle, when time does not permit the completion of the issue in the current examination cycle. In addition, accounting method issues that require an extensive amount of factual development may be developed over two examination cycles. The taxpayer should be provided written notification that the issue is under consideration, but is being delayed until a subsequent examination cycle. The taxpayer and the examination team should discuss which facts would be necessary to make a determination of the proper amount. The taxpayer should start to gather these facts and have them available when the IDR is issued in the subsequent examination cycle.

  5. The IRS and the taxpayer should review reports from prior cycles noting areas of agreement. If the facts and circumstances haven’t changed significantly, similar agreements could be reached in the current cycle. If this is done, the IRS and the taxpayer could substantially reduce the amount of examination time required to resolve these issues. They should also look at areas of prior disagreement to see if they can jointly arrive at a solution that will satisfy both parties.

Carryover Adjustments Schedule
  1. Form 6095, Carryover and Recurring Adjustments Schedule, or other suitable schedule, that fit the particular needs of the case should be prepared at the conclusion of the examination. A copy of the schedule should be placed in the planning file for follow-up by the succeeding team.

  2. A copy of Form 6095 will be given to the taxpayer along with the schedule of required adjustments and corresponding workpapers. By providing a copy to the taxpayer, the taxpayer could compute carryover adjustments for subsequent years. These adjustments might involve depreciation computations on items capitalized in prior years or certain accruals.

  3. Reach agreement with the taxpayer as to how to process carryover adjustments for filed and unfiled returns and document the agreement in the case file.

  4. The subsequent team will review the completed schedule along with the RAR. This will provide the subsequent team members with the confidence that all carryover/rollover adjustments have been identified.

Closing a Case

  1. LB&I examinations can often contain multiple entities and multiple years; one tax period of one entity is designated as the key case. Grouping those related components as one case should be done whenever possible, preserving the one-case concept.

  2. Issue teams complete their assignments at various stages of the examination cycle. Several tasks must be performed including the preparation of their portion of the NOPA before they are finished.

  3. All cases related to the key case must close through the primary examination group. An exception applies for Employment Tax and Excise Tax cases, which generally close out of their respective groups. The case manager enters all closing data in the Issue Management System (IMS). Current case closing guidance may be found on the Examination Closing Procedures web page at http://lmsb.irs.gov/hq/pqa/Case_Closing/Case_Closing_Procedures.asp.

  4. The taxpayer must submit a protest to the 30-day letter to address unagreed issues in order to exercise their appeal rights. After the protest is received and a rebuttal is written, the case is transferred to Appeals. RRA 98 changed the rules of interaction between LB&I and Appeals. The ex parte rules must be observed during all conferences with Appeals. See Rev. Proc. 2012-18.

Partial Closing

  1. The return of a related entity may be closed out in advance of the primary case. This is generally done at the request of the taxpayer or when agreement forms are received and must be processed.

  2. Care should be exercised to provide reasonable assurance that the partial closing is in the best interest of the Service. The examination report should indicate that the entity is part of a LB&I case and should document the reason(s) for the separate closing.

  3. Time spent must be closed out using Form 5344, Examination Closing Record, in Issue Management System (IMS). The case manager should keep copies of all closing documents in order to capture the results subsequent to closing.

Closing Actions

  1. All returns associated with the LB&I examination should be closed in coordination with the primary examination team. This includes both those examined and those surveyed. When the taxpayer’s copy of a return is inspected but not examined, appropriate comments should be made in the examination plan, planning file and in the transmittal letter to the examination report.

  2. Employment tax returns are generally controlled by the employment tax specialist and closed by the employment tax team member assigned to the case.

  3. Excise tax returns are generally controlled by the excise tax specialist and closed by the excise tax team member assigned to the case, except for excise tax on Form 5330 controlled by Employee Plans.

  4. Tax exempt and pension returns are generally controlled and closed by the TEGE team assigned to the case.

  5. Other types of returns may be controlled by other specialists and closed separately from the income tax files.

Disposition of Files and Workpapers
  1. If a case is going to Appeals, workpaper files are forwarded to Appeals for their use in resolving the unagreed issue(s). The case manager should arrange for CIC workpapers to be returned with a copy of the Appeals report after completion of any Appeals action. This will give the case manager immediate access to files needed for subsequent examinations and to allow for completion of the final status report without interrupting case closing action.

  2. CIC workpapers must be retired to the Federal Records Center no earlier than 4 years after the date of closing (AIMS Status 90). See Schedule 23 of Document 12990, Records Control Schedules, for additional guidance.

    1. CIC workpaper files that are retired to the Federal Records Center (FRC) should be designated for destruction 15 years from the date of closing. See Schedule 23 Item 42 in Document 12990.

    2. CIC Planning files may be retained for a period of 75 years per Schedule 23, Item 55 in Document 12990. For a listing of records included in a planning file see IRM Exhibit 4.46.3-1.

    3. Copies of original workpapers related to carryover/recurring issues may be retained as needed to promote effective tax administration.

  3. IC examination workpapers will be forwarded with the closed case file. Team managers with IC examinations may retain copies of appropriate reports, schedules, workpapers and other administrative data that may be needed for other future examinations.

  4. IRM 1.15.4, Retiring and Requesting Records, provides detailed procedures for the retirement of IRS records, including packing records, making cartons, shipping records and instructions for the completion of various forms. IRM 1.15.4.10 contains instructions on how to retrieve records from the FRC.

  5. If files need to be shipped to another location, the case manager should control the documents by utilizing Form 3210, Document Transmittal. Form 3210 must always accompany taxpayer sensitive records shipped to other offices (for example, Appeals, Counsel, LB&I Quality Measurement Staff, etc.).

  6. Mandatory IMS Workpapers, any electronic data received in response to IDRs, and Form 5701s are required to be maintained (uploaded) into IMS work papers for the unagreed issue(s). If examiners chose to create Word or Excel files outside of IMS, they should upload these documents to IMS workpapers for the unagreed issue(s). Please note, under no circumstance are examiners required to create an electronic version of a paper document solely for the benefit of Appeals in an unagreed case. However, if electronic documents are available, you should maintain them in the unagreed IMS case. See http://lmsb.irs.gov/hq/bsp/IMS/MandatoryInput111208.asp for IMS requirements.

Conference with Appeals

  1. LB&I employees may meet with Appeals before the Appeals process begins and after it is concluded in some circumstances.

  2. Changes brought about by RRA 98 Sec. 1001 give the taxpayer the opportunity to participate in most taxpayer-related communications between LB&I and Appeals. See Rev. Proc. 2012-18,§§ 2.01(3), 2.02(4).

Procedures for Conference with Appeals Regarding LB&I Cases

  1. As a result of RRA 98 Sec. 1001(a)(4), ex parte communications between Appeals Officers and other IRS employees are prohibited to the extent that such communications appear to compromise the independence of Appeals. See IRM 8.1.10.3.1, Permissible Communications. The following pertains to the ex parte rules:

    1. Ex parte communications are communications that take place in the absence of the taxpayer or the taxpayer’s representative. This prohibition is not limited to oral communications but applies to any form of communication, oral or written (manually or computer generated).

    2. The taxpayer may waive the ex parte restrictions.

    3. Appeals will hold a pre-conference meeting with the examination team. Appeals will notify the taxpayer/representative and give them the opportunity to attend.

    4. The purpose of the pre-conference is to discuss the issues, protest and the LB&I issue team’s rebuttal to the protest. A frank discussion of the issues will add to the appeals officer’s knowledge of the case. The need for any resources, specialists or expert witnesses will be discussed at this meeting.

    5. It is expected that the meeting will serve to establish lines of communication that will be maintained throughout consideration of the case between Appeals and LB&I.

    6. LB&I participants should share their views on the disputed issues, including their assessment of litigating hazards and the strategies involved in setting up adjustments on particular issues.

Requesting a Pre-Conference

  1. Subject to the ex parte communication provisions of RRA 98, unless an exception is agreed to between LB&I and Appeals, a pre-conference will take place on all LB&I cases designated by Appeals as Appeals Team Case Leader (ATCL) cases.

  2. Conferences may be requested on other LB&I cases by the case manager. The ATCL will be responsible for arranging the conferences on ATCL cases. The meeting for other cases will be arranged by the team leader/appeals officer following a written request from the case manager for the conference.

  3. LB&I and Appeals may agree that a preconference would not be useful in a given case in which a conference is required. The file should be documented with a memorandum, signed by appropriate officials from each function, specifying that no pre-conference is desired by either LB&I or Appeals.

  4. These procedures do not prohibit requesting conferences on other types of cases e.g., cases with industry-wide impact, specialized industries, coordinated issues or cases with significant issues.

Participation in Pre-Conference

  1. LB&I will determine the appropriate pre-conference participants.

  2. The Appeals team will usually consist of the ATCL or team leader and the appeals officer assigned to the case. Participation by management will be determined by industry guidelines.

  3. Area Counsel will be invited to participate in pre-conferences on all docketed cases. In non-docketed cases either the case manager or Appeals may request the participation of Area Counsel.

Other Communications with Appeals

  1. It is important that LB&I and Appeals maintain an open dialogue. The ex parte rules under Rev. Proc. 2012-18 must be followed. New information not presented during the examination may be presented to Appeals. See Policy Statements P-8-2 and P-8-3 in IRM 1.2.17. However, Appeals will release jurisdiction and return the case to LB&I when a taxpayer presents new information that was not previously reviewed by exam teams. See IRM 8.7.11.5.3, Returning a Case to LB&I. New taxpayer’s arguments(not including new information) or information provided in response to an inquiry from Appeals to clarify or corroborate information contained or referenced in the RAR, protest or rebuttal will be referred to LB&I for review and comment within a specific time frame, at least 45 days. Every effort should be made to handle these requests expeditiously and on a priority basis.

  2. The LB&I issue team may have to make additional contacts with the taxpayer to perform a complete review of the new information. The taxpayer will be notified when Appeals sends the information to the examination team for consideration. Remember that all communications, oral and written, must be shared with the taxpayer, unless the communications fall within one of the exceptions to the ex parte rules; for example, comments involving ministerial, administrative, or procedural matters. See Rev. Proc. 2012-18 § 2.03(2). The issue team’s evaluation of the information will also be shared with the taxpayer.

Applications to Docketed Cases

  1. The examination team is not expected to review and comment on the taxpayer’s petition before receipt of the case by Appeals. However, Appeals will provide Exam with a copy of the petition for review and comment in docketed cases.

  2. LB&I will provide a review of the petition to the extent it has knowledge of the facts and issues in dispute.

  3. A key part of the pre-conference meeting will be planning the timetables and resources needed to respond to new information that may be presented by the taxpayer. Recognition will be given to time frames established by the rules of the Tax Court in establishing priorities for the examination of new information and response to taxpayer positions.

Appeals Case Return Procedures

  1. Under IRM 8.7.11.5.3, Appeals will return the case to LB&I jurisdiction if:

    1. The taxpayer provides Appeals with information that LB&I previously requested during the examination, or

    2. If the taxpayer, on its own initiative, provides Appeals with information that was not previously shared with LB&I during the examination.

  2. Statute requirements:

    1. A minimum of 365 days must remain on the statute when the unagreed case is received in Appeals.

    2. When Appeals releases jurisdiction of cases to LB&I for consideration of new information or a new issue, there must be at least 210 days remaining on the statute when LB&I receives the case.

    3. LB&I must ensure there are at least 180 days remaining on the statute when Appeals receives the case from LB&I after consideration of new information or a new issue.

LB&I Process on Cases Returned From Appeals

  1. For release of jurisdiction cases, Appeals will update the case in IMS, which will generate an e-mail to the case manager and team coordinator informing them that the case is being returned to the group. The appeals officer will complete transmittal Form 5402 and state that the taxpayer has provided Appeals with new information and the case is being returned to LB&I. The actual hardcopy case will be returned through Technical Services.

  2. Appeals will notify taxpayer that the case will be returned to LB&I.

  3. As a reminder, Appeals may have secured a partial agreement for some issues prior to releasing jurisdiction to LB&I. Examiners should secure transcripts to see whether changes have been made to "tax as previously adjusted" .

LB&I Case Resolution and Closing Procedures Following Appeals Case Return

  1. If there are changes to the proposed tax and the taxpayer still does not agree, take the following actions:

    1. If appropriate, solicit new acknowledgment of the facts. See IRM 4.46.4.9.

    2. Attempt to come to agreement on the facts and document facts that remain in dispute

    3. Follow IRM 4.10.8.14,Corrected Reports

    4. Prepare revised 4549-A.

    5. Prepare update to the NOPA . Both the government and taxpayer’s position with respect to the new information should be addressed.

    6. A new 30-Day Letter will be issued if there is an increase to tax, subject to the provisions of IRM 4.10.8.13.9.

    7. No new 30 Day Letter will be issued if there is a decrease to tax.

    8. Review the protest for adequacy and prepare update to the rebuttal as necessary.

    9. Report transmittal to Appeals should highlight pertinent changes to RAR and efforts to reach agreement.

    10. Close through SB/SE Technical Services to Appeals as usual.

  2. If there is no change to the previous determination and the taxpayer still does not agree:

    1. If appropriate, solicit new acknowledgment of the facts. See IRM 4.46.4.9.

    2. Attempt to come to agreement on the facts and document facts that remain in dispute.

    3. Prepare update to the NOPA. Both the government and taxpayer’s position with respect to the new information should be addressed.

    4. No new RAR or 30-day Letter is issued.

    5. Review protest for adequacy and prepare update to rebuttal as necessary.

    6. Report transmittal to Appeals should highlight efforts to reach agreement.

    7. Close through SB/SE Technical Services to Appeals as usual.

  3. If the taxpayer now agrees, obtain taxpayer signature on RAR (revised for changes to government’s position if necessary) and close to CCP as usual.

Appeals Request for LB&I Review and Comment

  1. Under IRM 8.7.11.5.3 , Appeals will retain the jurisdiction of the case and provide LB&I with an opportunity to review and comment on the new information if:

    1. The taxpayer provides information in response to a question or request from Appeals to clarify or corroborate information contained or referenced in the RAR, protest or rebuttal, or

    2. The taxpayer makes a new argument and this new argument does not include new information.

  2. The Appeals Team Manager will send the information package along with all supporting information to Exam, allowing at least 45 days for written review and comment (subject to ex parte requirements) and granting an extension of time if mutually agreed.

Post-Settlement Conference

  1. The purpose of the post-closing conference is to discuss the settlement reached and its subsequent impact on the taxpayer. The conference is intended to supply the examination team with information that may be helpful in subsequent examinations of the taxpayer and to assist in identifying those issues that may be susceptible to resolution by application of issue resolution tools.

  2. A post-closing conference will be held on all cases after final disposition by Appeals unless an exception is agreed to between LB&I and Appeals. Area Counsel will be invited to attend this conference on all docketed cases. Area Counsel may attend these meetings in non-docketed cases at the request of either LB&I or Appeals. However, the conference can be waived if both Appeals and LB&I agree it is not necessary.

  3. This conference is not intended to be a critique of the settlement nor is it intended to replace LB&I’s dissent procedures. It is solely intended to communicate the resolution of the case to the examination team.

Direct Examination Time for Conference Procedures

  1. The team members should use Activity Code 598, Pre/Post- Appeals Conferences, to charge time for these meetings.

Dissent Procedures for Disagreements with Appeals Determinations

  1. This section provides formal procedures for LB&I to voice their concerns about an Appeals settled case. These procedures are not intended to replace any informal procedures currently in use at the local level. Local management in LB&I and Appeals continue to address and resolve disagreements over case resolutions at the lowest possible level. These formal procedures are to be used when the informal process results in LB&I still having unresolved significant concerns about the Appeals disposition of an issue(s). See IRM 4.2.1.5.3,Disagreements With Appeals Determinations, and IRM 8.6.4.1.9, Disagreements to Appeals Determinations.

Assessment of Issue Team Member's Performance

  1. At the conclusion of each LB&I case, the case manager or the issue manager will consider whether written feedback regarding the issue team members work should be submitted to the employee’s manager.

Performance Assessment

  1. The manager of an employee supporting a LB&I examination needs feedback for use in preparing the annual appraisal of that employee. The issue manager or the case manager’s assessment is not intended to be a substitute for the overall performance assessment, but rather is one of the factors that will be considered in the total evaluation subsequently prepared by the employee’s manager.

  2. Written feedback should reflect not only how well the team member performed, but what he or she contributed to the examination.

  3. Case and/or issue managers may ask for feedback from team coordinators about the work performed by issue team members.

Post-Examination Management Critique

  1. A critique of the completed cycle should be performed to gather recommendations or suggestions for improving case efficiency, communication and collaboration.

  2. The case manager may accomplish the goals through a collaborative meeting or through multiple meetings. The critique should be held during the final stages of the examination or within thirty days after the case is closed from the field. Critiques should be held even when there are overlapping examinations.

Post-Examination Critique Objectives

  1. In a post-examination critique, LB&I will seek opportunities to improve the quality and efficiency of the examination process. This can be accomplished by:

    1. Discussing issue exit strategies

    2. Assessing the effectiveness of the examination

    3. Developing recommendations for improving subsequent examinations

    4. Evaluating how the issue-based process and collaboration worked, and what opportunities exist for improving tax administration with this taxpayer

    5. Evaluating opportunities to improve the effectiveness of the issue-based process and the contribution of each participant

    6. Evaluating the effectiveness of computer programs

Critique with the Examination Team

  1. Depending on the type of examination plan used, the critique details should be addressed in the communication section.

  2. Transfer of knowledge can be facilitated if each issue team member maintains summaries of topics and related background material to be used in preparation for the post-examination critique. Contemporaneous updating of this information throughout the examination should be helpful in improving the efficiency and effectiveness such as:

    1. Recommendations for issue development

      Example:

      Certain probes, accounts or audit procedures can be eliminated or expanded

    2. Identification of special computer programs that should be employed and any additional records that will be needed

    3. Recommendations regarding time requirements

    4. Identification of potential issues based on information obtained during the current examination

    5. Suggested adjustments to the scope or depth of the examination

  3. If a new cycle is to be opened on the same taxpayer, combining the post-examination critique meeting with the next cycle’s opening conference may be a useful technique. The similarities in the objectives of the two meetings make the critique an important source of information for the next cycle’s issue team members. Where applicable, consideration can be given to combining the two meetings or portions of them, whether or not the same case manager is assigned to the subsequent examination.

Scope of Critique

  1. The case manager, issue manager(s) and issue team members should keep in mind that the primary objective for conducting the critique is to evaluate opportunities to improve future examinations. The recent examination must be thoroughly evaluated with emphasis on how subsequent examinations, if warranted, can be improved. Some of the more important topics to be discussed during the critique are listed below:

    • Assess whether the results were commensurate with the time spent.

    • Determine whether examination procedures were effective and efficient. This appraisal should be in sufficient detail to provide the case manager and/or issue manager(s) of the subsequent examination a basis for adopting new examination techniques and planning new specialized computer programs.

    • Assess whether the examination plan effectively monitored and controlled the examination, provided adequate guidelines to issue team members, facilitated a more orderly examination and adequately serve as a vehicle for coordination.

    • Assess issue team member interactions. This discussion should be approached from the standpoint of identifying corrective actions the next case manager and issue manager(s) can take in solving or avoiding problem areas.

    • Assess the adequacy of the team’s compliance with the IDR management process.

    • Assess the effectiveness of the assistance or support participation. If there was no assistance or support, should the next examination provide for participation? This discussion should involve: 1) analysis of time vs. results; 2) the need for improved communication, cooperation or commitment; and 3) expected or resulting benefits of support group participation.

    • Estimate the time needed for the next examination. This subject is best left until the end since some of the discussions and resulting recommendations will involve expenditures of more or less time than spent on the completed examination. The case manager and issue managers will need this estimate for advance planning and program planning purposes.

    • Assess whether all agreed and unagreed issues were adequately documented. Determine whether workpapers were adequately prepared during issue development and if the issues in the RAR were adequately explained avoiding additional time and potential loss of tax revenues.

    • Assess whether issues were timely resolved during the audit using appropriate expertise.

  2. Potential offset issues should be considered, critiqued and documented by examiners in the event claims are subsequently filed by the taxpayer.

Post-Examination Critique with the Taxpayer

  1. A joint critique of the exam process may provide a valuable opportunity to improve future case processes, collaboration and cooperation with the taxpayer.

  2. The post examination critique with the taxpayer can be held separately.

  3. A list of items to discuss during the critique with the taxpayer is contained in Exhibit 4.46.5-1. Items to be discussed in the critique should be given to the taxpayer at the opening conference. The taxpayer should be encouraged to maintain critique notes during the course of the examination.

  4. The taxpayer should be advised that the case will be part of an examination survey conducted by an outside contractor for LB&I. All responses are confidential and intended to assist LB&I in improving customer satisfaction.

Documentation and Disposal of Post-Examination Critique

  1. A written report is required on each case and should be prepared by the case manager at the conclusion of the post-examination critique. The report should, at a minimum, include:

    • The subjects discussed

    • The conclusions reached

    • Recommendations and instructions to the next team

    • Identification of agreed recurring issues (these must be discussed with the taxpayer)

    • Taxpayer's recommendations and comments

    • Identification of the participants

  2. The case manager should retain the critique report in the planning files for use by the subsequent case manager unless other specific guidance on the disposition of critiques has been issued.

Agenda for Post-Examination Critique

Agenda Topics
1 Information Document Request (IDR) Form 4564:
a. Prioritization
b. Clarity
c. Timeliness -- issuance and responses
d. Appropriate scope
2 Notice of Proposed Adjustment -- Form 5701:
a. Clarity
b. Discussion and resolution of issues
c. Timeliness -- issuance and responses
d. Agreement on facts
e. Accelerated issue resolution
3 Progress Meetings:
a. Frequency
b. Content - address problems and concerns
4 Issue Team:
a. Scheduling
b. Discussion of issues
c. Technical Specialist
5 Assistance or support examinations:
a. Timeliness
b. Scope and depth
c. Taxpayer support
6 Data processing:
a. Effectiveness of techniques
b. Access/resources
7 Accommodations:
a. Space and equipment
b. On-Site visitations
8 One-stop Service
9 Issue Team Assignment:
a. Rotation of personnel
b. Team expansion/contraction
c. Diversion of personnel
10 Scheduling/responsibility:
a. Peak period coordination
b. Rollover computations
c. Interviews of corporate officials
d. Cycle size-projected