4.51.2 LMSB Administrative Guidance220.127.116.11 Overview18.104.22.168 LMSB Directors' Authority22.214.171.124 LMSB Emerging Issues126.96.36.199.1 Identifying Tax Issues188.8.131.52.2 LMSB Emerging Issues Designation184.108.40.206.3 Emerging Issue Validation220.127.116.11.4 LMSB Emerging Issue Report18.104.22.168 LMSB Coordinated Issues22.214.171.124.1 Proposed Coordinated Issue Papers126.96.36.199.2 LMSB Coordinated Issue Paper Approval Process188.8.131.52.2.1 Technical Review by Chief Counsel184.108.40.206.2.2 Chief Counsel Recommends Against the Issuance of a Coordinated IssuePaper220.127.116.11.2.3 Approval of Coordinated Issue Papers18.104.22.168.2.4 Effective Date and Issuance of LMSB Coordinated Issue Papers22.214.171.124.3 Annual Review of LMSB Coordinated Issue Papers126.96.36.199.3.1 Decoordination of an LMSB Coordinated Issue188.8.131.52.3.2 Modification of an LMSB Coordinated Issue Paper184.108.40.206 Coordinating Listed Transactions220.127.116.11 Developing Administrative Guidance -- LMSB Directives18.104.22.168.1 Procedures for Issuing LMSB Directives22.214.171.124.2 Clearance and Routing Process126.96.36.199.3 Congressional Review188.8.131.52.4 Publication184.108.40.206.5 Annual ReviewExhibit 4.51.2-1 Letter of Understanding with NTEU on LMSB Administrative Guidance Part 4. Examining ProcessChapter 51. LB&I Case ManagementSection 2. LMSB Administrative Guidance 4.51.2 LMSB Administrative Guidance 220.127.116.11 (12-09-2005) Overview This section: reviews the authority of Large and Mid-Size Business Division (LMSB) management to provide guidance and direction to examiners in planning and developing examinations; distinguishes LMSB administrative guidance from published legal guidance; provides standardized guidelines for evaluating emerging issues and proposing guidance; provides procedures for issuance of LMSB Directives and Coordinated Issue Papers; clarifies the coordination required for listed transactions; establishes expedited procedures for issuing Coordinated Issue Papers associated with listed transactions, and establishes a system for communicating guidance to the field and to external stakeholders. 18.104.22.168 (12-09-2005) LMSB Directors' Authority The Commissioner has the authority to administer and enforce the Internal Revenue Code (Treasury Order No. 150-10). The authority is redelegated to the Division Commissioners (Delegation Order 193). Division Commissioners may delegate to the Division Directors, certain authorities on matters, including cases and resources, previously delegated to Service Center or District Directors. As a result, Industry Directors and the Director, Pre-Filing and Technical Guidance (PFTG); Director, Field Specialists; and the Director, International may, in the administrative process, issue guidance to field employees to promote better understanding and consistency. Administrative guidance may: address administrative procedures and compliance actions; provide operational instructions for planning and conducting examinations in areas of unsettled law; provide interim technical guidance for examiners via Coordinated Issue Papers; address time and resource allocations, including specialist involvement on cases; and mandate the use of specific audit techniques in developing issues. The Treasury Department and Office of Chief Counsel provide published legal guidance that establishes Service legal position. However, LMSB administrative guidance may cite or refer to established legal principles that have been published in the Internal Revenue Bulletin. To the extent that administrative guidance impacts other offices, Industries or Divisions, those offices, etc. will be consulted and as appropriate, will participate in developing the guidance. 22.214.171.124 (12-09-2005) LMSB Emerging Issues A tax issue that is designated as a LMSB emerging issue has the following characteristics: It arises from a new or novel set of facts or through questions of the proper application of tax law; It has not been addressed by published legal guidance or administrative pronouncements of the Service; It is susceptible to inconsistent treatment by both the Service and LMSB taxpayers; It may or may not involve a potential abusive tax avoidance transaction; It is not necessarily limited to a specific industry and can impact across Service Divisions. 126.96.36.199.1 (12-09-2005) Identifying Tax Issues Tax issues can be identified by Examiners, Managers, Field Specialists, Technical Advisors, and other IRS personnel. Sources for identifying issues include current examinations, news articles, the Tax Shelter Hotline, taxpayer inquiries and industry contacts. Issues identified should be brought to the attention of the applicable Technical Advisor and LMSB Director’s Office as early as possible. Technical Advisors coordinating with the applicable LMSB Director’s Office, as they become aware of issues, will conduct an initial review to determine whether the issue should be designated as an emerging issue. Information should be gathered on the number of cases containing the issue, the tax impact, the number of industries or divisions impacted and the types of returns impacted. The review will include Website research and contacts with Examiners and Counsel. After the initial review, the Technical Advisor and Industry or Issue management officials will brief the responsible LMSB Director on potential issues warranting emerging issue designation. 188.8.131.52.2 (12-09-2005) LMSB Emerging Issues Designation Designating Emerging Issues by LMSB Directors (as defined in IRM 184.108.40.206) If the emerging issue is primarily Industry specific, the Industry Director will determine if the issue should be designated an emerging issue. If designated, an emerging issue alert memorandum will be prepared and an Industry Team assembled to validate the issue and propose guidance. If the emerging issue is Cross-Industry, the Director, PFTG, International or Field Specialists, as appropriate, is responsible for making the designation. If designated, an emerging issue alert memorandum will be prepared and as appropriate, an Issue Team assembled. The team will be responsible for validating the issue and proposing guidance. Emerging Issue Alert memorandum will contain the following information: Technical Advisor Contact (include name, e-mail address and phone #); Alert Title; Primary Code Section(s), and Brief Summary of Tax Issue – No technical conclusion should be stated. The Emerging Issue Alert memorandum will be issued by the Director and posted to the Director’s Website. An e-mail with a link to the document will be sent to LMSB communications and PFTS@irs.gov . LMSB Communications will include information on the issue in the LMSB Frontline or other employee newsletter. PFTS will add it to LMSB Emerging Issue Web page. Once an emerging issue is identified, examiners will be required to contact the Technical Advisor if the issue is present in their tax case to gain insight on the issue and provide feedback on the issue to the specialist. 220.127.116.11.3 (12-09-2005) Emerging Issue Validation An Industry/Issue Team will be directed by the Industry Director or the Director, PFTG, International or Field Specialists, and may include Examiners, Technical Advisors and Field Specialists; may include support from the Appeals ISP; may include team members from other operating divisions as needed; and will include appropriate staff from the Office of Chief Counsel. As the Teams is formed, a formal meeting will be held with team members to review objectives and responsibilities as per the Letter of Understanding (LOU) with NTEU dated November 15, 2002. All impacted NTEU chapters, as defined in the LOU, will be invited to participate. Team members will be given the training and materials needed to complete the administrative guidance assignment. Other procedures related to team members are covered in the LOU located at Exhibit 4.51-1. Time expended by emerging issue team members should be charged as follows: Revenue Agents, Field Specialists and Technical Advisors - Time should be charged to Activity Code 526, Pre-filing and Technical Guidance. Managers - Time should be charged to Activity Code 675, Compliance Outreach. Team members from other organizations should check with their organization to determine appropriate code. All travel costs incurred by LMSB emerging issue teams should be paid for by the participants' office. Travel costs should be charged to the "case related" purpose code. The Industry/Issue Team will conduct necessary research and as appropriate, may contact taxpayers and industry groups for input, perform case visits and coordinate with Chief Counsel for legal advice. Any formal Counsel advice (Technical Advice) should be requested during this stage of the process. The team may also seek input from Strategy, Research, and Program Planning (SRPP), Technical Advisors and other Industries, offices and Divisions, as applicable. 18.104.22.168.4 (12-09-2005) LMSB Emerging Issue Report The Industry/Issue Team will prepare an emerging issue report. The Industry/Issue Team will evaluate the impact of the issue by considering input from examiners and all significant factors; including, whether the issue has material impact on tax administration, is widespread, has significant impact on revenue or Service resources; and if there is significant inconsistency in application. The report will describe the fact pattern of the issue and the questions raised. The report will also review the existing guidance. Based on the evaluation, the team may propose coordination (see IRM 22.214.171.124), alternative administrative guidance (see IRM 126.96.36.199) or that the issue be referred to the Office of Tax Shelter Analysis (OTSA) for consideration as an emerging tax shelter listed transaction. The emerging issue report will be forwarded to the LMSB Director for concurrence and implementation. If the course of action is to issue administrative guidance, every effort should be made to finalize the guidance quickly. Once administrative guidance is finalized and released, the issue will no longer be considered an emerging issue and the alert memorandum will be removed from the LMSB Emerging Issue Website. Emerging issue memoranda should also be removed, if guidance is not warranted because of court decisions, published guidance, legislation or other reasons. An annual review of emerging issue alerts will be made by the designating executives to ensure their continued necessity. 188.8.131.52 (12-09-2005) LMSB Coordinated Issues An LMSB Coordinated Issue Paper is LMSB administrative guidance that: Identifies key industry or cross-industry issues; Expresses the position of the Commissioner, LMSB to ensure uniform treatment of taxpayers, but does not represent the official position of the Service with respect to legal position; Provides guidance to address compliance issues; Establishes a consistent compliance position; May impact more than one industry; and/or other operating divisions, and Is binding on all IRS examiners, and they cannot deviate from the position(s) stated in the Coordinated Issue Paper without the concurrence of the Industry/Issue Team; When an Industry/Issue Team determines an issue materially impacts tax administration, formal coordination may be proposed. If an LMSB Director agrees an issue should be coordinated, the team will develop a Proposed Coordinated Issue Paper. For coordination of listed transactions, see 184.108.40.206. Other operating divisions may also issue Coordinated Issue Papers, and IRS examiners, including LMSB examiners, must follow the provisions of those Papers. 220.127.116.11.1 (12-09-2005) Proposed Coordinated Issue Papers The team will need to coordinate early and regularly with Chief Counsel and other affected division(s) during the development process. The Proposed Coordinated Issue Paper will include: legal question to be addressed; facts (the facts should be validated and scenarios limited to no more than three); law (should be concise and not contain exhaustive legal analysis of each issue, sub-issue or legal nuance); discussion (should include taxpayers’ positions); conclusion; and a disclaimer stating, "This issue paper is not an official pronouncement of the law or the position of the Service and cannot be used, cited or relied upon as such." The Industry/Issue Team will generally request taxpayer input by submitting the Proposed Coordinated Issue Paper to key cases through the Team Managers assigned to the cases. The Team may also solicit input directly from related industry and professional associations. Papers should also be sent by e-mail to directly impacted internal stakeholders, and should be circulated to other offices and divisions as appropriate. After comments have been received from both internal and external sources, the proposed Coordinated Issue Paper will be revised, as needed, and submitted for approval. 18.104.22.168.2 (12-09-2005) LMSB Coordinated Issue Paper Approval Process After the proposed Coordinated Issue Paper is developed, it will be formally submitted to the Commissioner, LMSB, for approval. This process includes a technical review by Chief Counsel as outlined below. 22.214.171.124.2.1 (12-09-2005) Technical Review by Chief Counsel The proposed Coordinated Issue Paper is submitted to the Director, PFTG, through the appropriate Technical Advisor Manager. The proposal should include: A brief, but concise, summary of the issue; and A statement on whether the proposed Coordinated Issue Paper has been discussed with the appropriate external customers (i.e., industry groups, associations, etc.) Upon receipt and review of the proposed Coordinated Issue Paper, the Director, PFTG, will forward it to the office of LMSB Division Counsel in Headquarters, which will establish control and then submit the Paper for review to the Associate Chief Counsel office(s) with jurisdiction over the subject matter. The responsible Associate Chief Counsel office(s) will review the paper and prepare a memorandum commenting on the technical correctness of the paper. PFTG will monitor the progress of the Coordinated Issue Paper while it is in the review process in Counsel. With the exception of proposed Coordinated Issue Papers that warrant expedited clearance (e.g. see 126.96.36.199 Coordinating Listed Transactions), the Associate Chief Counsel's office having primary subject matter jurisdiction will complete its review of the proposed Coordinated Issue Paper within 90 days of receipt. The reviewer(s) will work directly with the Industry/Issue Team on any needed revisions to the paper. If the review is not completed within 90 days, a monthly status report on the progress of the issue will be forwarded through the Office of LMSB Division Counsel in Headquarters to the Director, PFTG and through PFTG to the Industry/Issue teams. 188.8.131.52.2.2 (12-09-2005) Chief Counsel Recommends Against the Issuance of a Coordinated Issue Paper If the Associate Chief Counsel with primary subject matter jurisdiction disagrees with the issuance of a Coordinated Issue Paper, the Director, PFTG and the responsible Director(s) may request a meeting with LMSB Division Counsel and the appropriate Associate Chief Counsel to resolve differences. The responsible Director(s) will then make a decision whether to proceed with the Coordinated Issue Paper or whether to propose alternate administrative guidance. 184.108.40.206.2.3 (12-09-2005) Approval of Coordinated Issue Papers After the completion of the technical review, LMSB Division Counsel will notify the Director, Pre-Filing and Technical Guidance of his or her concurrence with the issuance of the proposed Coordinated Issue Paper. Once notified, the Director, PFTG will forward the proposed Coordinated Issue Paper to affected Technical Advisors, Technical Advisor Managers, all Industry Directors, the Directors, Field Specialists and International and other offices within LMSB or other Divisions that may be impacted by the proposed Coordinated Issue Paper to secure their concurrence. When all concurrences are secured, the proposed Coordinated Issue Paper will be submitted for signature to the Commissioner, LMSB, through the Director, PFTG. 220.127.116.11.2.4 (12-09-2005) Effective Date and Issuance of LMSB Coordinated Issue Papers An LMSB Coordinated Issue Paper will become effective upon the approval of the Commissioner, LMSB and delivery to GAO/Congress under Public Law 104-121. At that time, the Coordinated Issue Paper will be released both internally and externally via the IRS Web page at http: //www. irs. go v /businesses /article/ 0, id= 96445,00 .html. After an issue is coordinated, the Service may continue, as appropriate, to work with taxpayer groups to reach resolution through the Industry Issue Resolution process. 18.104.22.168.3 (12-09-2005) Annual Review of LMSB Coordinated Issue Papers Industry Directors and the Director, PFTG will review all LMSB Coordinated Issue Papers for applicability on an annual basis. If a paper is no longer valid because it is impacted by subsequent legislation, other guidance or other reasons, appropriate actions will be taken to decoordinate or modify the paper. 22.214.171.124.3.1 (12-09-2005) Decoordination of an LMSB Coordinated Issue Once an issue has been resolved (usually by a published position, court decision or legislation) or is no longer applicable, it will be considered for decoordination. Input from the affected Industry Directors; Directors, PFTG, Field Specialists and International; Counsel, Appeals and any affected operating units should be secured. Industry Directors and Technical Advisor Managers, with the concurrence of impacted stakeholders will submit requests for decoordination to the Director, PFTG. Director, PFTG will forward the decoordination request to LMSB Division Counsel for advice and concurrence. Once all concurrences have been secured, the decoordination request will be forwarded to the Commissioner, LMSB. The authority to decoordinate an LMSB coordinated issue rests solely with the Commissioner, LMSB. Upon approval, internal and external customers will be notified that the issue has been decoordinated. 126.96.36.199.3.2 (12-09-2005) Modification of an LMSB Coordinated Issue Paper When it is determined that an LMSB Coordinated Issue Paper needs to be updated, the Industry/Issue Team should follow the procedures in IRM 188.8.131.52.1 to develop a proposed revised Coordinated Issue Paper. The approval process in IRM 184.108.40.206.2 also applies to proposed revised Coordinated Issue Papers. 220.127.116.11 (12-09-2005) Coordinating Listed Transactions As emerging issues in the tax shelter area are developed, they may result in the issuance of a Notice or other published guidance officially listing the transaction as a tax shelter. When this occurs, the listed transaction will be treated as a coordinated issue as of the date the listing notice is issued. A memorandum will be issued by the responsible Division Commissioner to affected operating units. The memorandum will contain the name of the Issue Champion, the Technical Advisor/Issue Specialist to contact and attach a copy of the listing notice, and a brief concise summary of the notice. If the listed transaction surfaces during an examination it must be raised as an issue following the guidance position. Examiners should contact the Technical Advisor/Issue Specialist and provide the name of the taxpayer, taxable period(s) involved, type of listed transaction, the name of the promoter, if known, the name and telephone number of the Team/Group Manager and, if applicable, the name and telephone number of the Team Coordinator. The initial contact may be via e-mail (utilizing secure messaging), fax or telephone. Examiners should consult with the Technical Advisor/Issue Specialist and local area Counsel on the development of the issue. Examiners must secure the concurrence of the Technical Advisor/Issue Specialist if their examination deviates from any mandated specific examination techniques proposed for issue development or their proposal for adjustment deviates from any stated legal positions. Examiners must also consult with and secure the concurrence of the Technical Advisor/Issue Specialist and Counsel before proposing any resolution other than full concession of the issue by the taxpayer. No proposals can be made without the concurrence of the Issue Champion. After initial published guidance is released, the responsible division and Chief Counsel staff will meet to discuss the need to further develop the issue. The discussion will include whether there is a need for Counsel to provide a thorough legal analysis of the issue or other guidance. If additional guidance is needed, the group will decide what format should be used to issue the additional legal analysis. For example, the additional legal analysis might take the form of a Chief Counsel Notice, a part of an audit handbook/ techniques guide, or a revenue ruling. An Associate Chief Counsel will be assigned primary responsibility for preparing the additional legal analysis.. That Associate office will work with the Issue Team on the analysis and coordinate with other Associates as necessary. The issue team should regularly coordinate with Chief Counsel staff during the development of the legal analysis. In addition to the legal analysis, a Coordinated Issue Paper will be prepared based on the initial published guidance, containing only a concise legal analysis. The issue team will prepare the draft Coordinated Issue Paper in coordination with the Associate Chief Counsel. When the draft Coordinated Issue Paper is ready for clearance, expedited 30 day clearance procedures will be used. Counsel should coordinate with the Issue team during the review process. For LMSB Coordinated Issue Papers, see 18.104.22.168.2 LMSB Coordinated Issue Paper Approval Process for procedures for obtaining approval and steps necessary to release the Coordinated Issue Papers. 22.214.171.124 (12-09-2005) Developing Administrative Guidance -- LMSB Directives If it is determined that coordination or referral to OTSA is not warranted and the Director (as defined in IRM 126.96.36.199) determines an LMSB directive to the Field is needed, the Industry/Issue Team will be directed to prepare the guidance. The purpose of LMSB Directives is to provide guidelines and instructions to examiners on procedures and administrative aspects of compliance activities to ensure consistent treatment of taxpayers. The Industry/Issue Teams will collaborate with affected internal stakeholders during the drafting stage. Input from external stakeholders may be requested as deemed necessary. The responsible Division management will direct the Industry/Issue Teams in preparing the Directive. Area Counsel will provide ongoing review. Industry Directors; and the Directors, Field Specialists and International may issue LMSB Directives on Industry specific issues, and issues impacting Field Specialists and International Examiners, respectively. The LMSB Commissioner or Commissioner's designee will issue LMSB Directives on Cross-Industry issues. The responsible Director will work with the Office of Division Counsel (LMSB) in preparing the Directive. Directives may address one or more of the following: Examination planning; Issue development; Audit techniques; Operational guidance, or Resource allocation. LMSB Examiners are expected to follow guidelines and instructions provided in LMSB Directives. If the Directive is jointly issued with another operating division, then examiners of both divisions must follow the Directive. 188.8.131.52.1 (12-09-2005) Procedures for Issuing LMSB Directives Directives will be in writing and may be issued by the LMSB Commissioner, Industry Directors, and the Directors, Field Specialists, Pre-filing and Technical Guidance, and International. The Directive will be prepared in the form of a memorandum to LMSB Senior Management with copies to LMSB Counsel and Appeals. Detailed instructions will be attached to the memorandum as necessary. Directives will contain the following disclaimer: " This LMSB Directive is not an official pronouncement of the law or the position of the Service and cannot be used, cited or relied upon as such." 184.108.40.206.2 (12-09-2005) Clearance and Routing Process The responsible Director will forward the draft Directive for concurrent review and clearance to the Director, PFTG; the Industry Directors; the Directors, Field Specialists and International; to the appropriate Directors in other Operating Divisions; and to the Area Counsel (or Division Counsel (LMSB) for cross-industry issues). The Area Counsel or Division Counsel will coordinate their review with the Associate Chief Counsel, if necessary. Directors and Counsel will have 15 days to respond. If the reviewing office determines that the Directive raises issues that cannot be resolved within the 15-day period, that office will consult with the responsible Director to reach a mutually agreed extension. After review and concurrence, the Directive will be signed and issued by the responsible Director. Differences will be elevated to the Deputy Commissioner, LMSB. 220.127.116.11.3 (12-09-2005) Congressional Review Each document will be reviewed to determine whether it is a rule under Public Law 104-121. Under Public Law 104-121, a rule is an agency action that constitutes a statement of general or particular applicability and future effect designed to implement, interpret or prescribe law or policy. The focus of the law is to require congressional review of agency actions that substantially affect the rights or obligations of outside parties. Documents determined to be "rules" will be issued upon the approval of the Director and delivery to GAO/Congress. 18.104.22.168.4 (12-09-2005) Publication LMSB Directives will be available both internally and to the public. The responsible Director will forward all Directives by e-mail to LMSB Office of Communications and Liaison for publication on irs.gov. http:// www. irs. go v /businesses / corporations / article /0, ,id = 96915 ,00. html, which will also be linked to by the appropriate Intranet sites. The e-mail will contain the Directive as an attached Word file and a separate statement or summary of the Directive. A copy will be sent to PFTS@irs.gov. In the event the issuing office opposes public distribution of the Directive, approval for a waiver, consistent with FOIA provisions, must be obtained from the Commissioner, LMSB. 22.214.171.124.5 (12-09-2005) Annual Review The responsible Director must review LMSB Directives annually and take action to amend or remove the Directive. Documents should also be reviewed to determine if they contain interim instructions that should be incorporated into the IRM. Exhibit 4.51.2-1 (12-09-2005) Letter of Understanding with NTEU on LMSB Administrative Guidance No short description is available for this image.This is a LOU with NTEU on LMSB Administrative Guidance Please click here for the text description of the image. There is currently no description available for this image. For help with this image, please call the IRS.gov Helpdesk at 1-800-876-1715. Please click here for the text description of the image. There is currently no description available for this image. For help with this image, please call the IRS.gov Helpdesk at 1-800-876-1715. Please click here for the text description of the image.