4.71.19 Fast Track Settlement Procedures

Manual Transmittal

August 10, 2017

Purpose

(1) This transmits revised IRM 4.71.19, Employee Plans Examination of Returns, Fast Track Settlement Procedures.

Material Changes

(1) IRM 4.71.19.1, Program, Scope and Objectives, and the subsections thereunder, were added to meet the new internal controls requirements.

(2) Minor editorial changes have been made throughout the document.

Effect on Other Documents

None

Audience

Tax Exempt and Government Entities
Employee Plans

Effective Date

(08-10-2017)


Robert S. Choi
Director, Employee Plans
Tax Exempt and Government Entities

Program Scope and Objectives

  1. Purpose: IRM 4.71.19, Employee Plans Examination of Returns, Fast Track Settlement Procedures, provides an alternative method for resolving certain unagreed issues that are not eligible for resolution under EPCRS or a DO 8-3 agreement. Prior to the Fast Track Settlement (FTS) program, these issues could only be handled under the traditional unagreed (30-Day/90-Day) route.

  2. Audience: This IRM provides procedures for agents, their group managers and support staff in EP Exam.

  3. Policy Owner: Director, EP Examination.

  4. Program Owner: EP Examination.

  5. Program Authority: EP Examination’s authority to resolve issues is derived from its authority to make determinations of tax liability under IRC 6201.

  6. Program Goals: The information in this IRM is provided to facilitate use of the FTS for certain unagreed issues resulting from a TE/GE examination or a Form 1040/1120 discrepancy adjustment.

Background

  1. EP Examination is the division designated to resolve certain unagreed issues using the FTS terms outlined in this IRM.

Authority

  1. Announcement 2012-34, IRB 2012-36, 334 is the authority for resolving certain unagreed issues raised during a TE/GE examination or Form 1040/1120 discrepancy adjustment that cannot be resolved through EPCRS or a DO 8-3 agreement.

Program Controls

  1. Tax Exempt Quality Measurement System (TEQMS) is the quality control system used to oversee the entire examination program. For more information on TEQMS, see IRM 4.71.15.1.3, Program Controls and Program Reports - TEQMS.

  2. All examinations will be done in accordance with the Taxpayer Bill of Rights as listed in IRC 7803(a)(3).

    Note:

    Additional information may be found on the irs.gov website at www.irs.gov/taxpayer-bill-of-rights.

Acronyms and Forms

  1. This manual uses the following acronyms and references the following forms.

    Acronyms

    Acronym Definition
    ATAT Abusive Tax Avoidance Transaction
    DO Delegation Order
    EP Employee Plans
    EPCRS Employee Plans Compliance Resolution System
    FTS Fast Track Settlement
    FTS AO FTS Appeals Official
    IRS Internal Revenue Service
    RAR Revenue Agent Report
    TEQMS Tax Exempt Quality Measurement System
    TE/GE Tax Exempt and Government Entities


    Forms and Schedules

    Form Name
    Form 990-T Exempt Organization Business Income Tax Return
    Form 1040 U.S. Individual Income Tax Return
    Form 1120 U.S. Corporation Income Tax Return
    Form 5330 Return of Excise Taxes Related to Employee Benefit Plans
    Form 2848 Power of Attorney and Declaration of Representative
    Form 14017 Application for Fast Track Settlement
    Form 5599 TE/GE Examined Closing Record
    Form 1900 Income Tax Survey After Assignment
    Form 5772-A Employee Plans (EP) Workpaper Summary
    Form 5773-A Employee Plans (EP) Workpaper Continuation Sheet
    Form 10329 Transmittal Sheet-Related Cases


Overview of Fast Track Settlement (FTS) Program

  1. Announcement 2008–105, IRB 2008-48, 1219, FTS for TE/GE Taxpayers, formally announced the availability of a pilot Appeals FTS program to enable taxpayers under TE/GE EP to resolve certain unagreed issues while the case is still open in an EP field group.

  2. Announcement 2012-34, IRB 2012-36, 334, formally established FTS as a nationwide permanent program to potentially resolve certain unagreed issues raised through a TE/GE examination or Form 1040/1120 discrepancy adjustment.

  3. FTS is not available to resolve issues that can be resolved through EPCRS or through a Delegation Order 8-3 (DO 8-3) closing agreement.

  4. In EP, FTS can only be utilized to resolve unagreed issues in the following types of cases:

    1. Form 5330 exams

    2. Form 990-T exams

    3. Form 1040 discrepancy adjustments

    4. Form 1120 discrepancy adjustments

    5. Penalties related to a case that is under EP exam.

      Note:

      Penalties under IRC 6700 are excluded.

  5. FTS will enable EP entities that currently have unagreed issues in at least one open period under examination to work together with EP and the Office of Appeals (Appeals) to resolve outstanding disputed issues while the case is still in EP jurisdiction.

  6. TE/GE and Appeals jointly administer the FTS process.

  7. FTS is used to resolve factual and legal issues.

  8. FTS may be initiated at any time after an issue has been fully developed, but before the issuance of a 30-Day letter.

  9. Under FTS, the EP group manager or designee:

    1. Coordinates preparation and submission of the application package,

    2. Notifies the taxpayer of acceptance into or rejection from the FTS program,

    3. Participates in the FTS Session on behalf of the government, and

    4. Is primarily responsible for accepting or rejecting any settlement proposal that is offered as a result of the FTS.

  10. The FTS application will be reviewed by both the group manager and the Area Manager (or their designee) before it is sent to the Appeals FTS Program Manager for final approval.

  11. The Appeals Team Manager responsible for TE/GE programs serves as the Appeals FTS Program Manager.

  12. In managing cases eligible for FTS, the Appeals FTS Program Manager may consult with the EP group manager.

  13. FTS enables the taxpayer to work together with the EP agent, the EP group manager, and the Office of Appeals.

    1. All three parties (EP, the taxpayer, and Appeals) are active participants in the process, and

    2. All three must agree before a proposed resolution can be implemented.

  14. FTS is designed to be completed in approximately 60 days from the date of acceptance into the FTS program.

  15. The prohibition against ex parte communications between Appeals Officers and other IRS employees provided by section 1001(a) of the Restructuring and Reform Act of 1998 does not apply to the communications arising in the FTS process because the Appeals personnel are facilitating an agreement between the taxpayer and EP and are not acting in their traditional Appeals settlement role.

  16. If the parties fail to resolve any issue in FTS, the taxpayer retains the option of requesting that the issue be heard through the traditional Appeals process.

Case Eligibility and Exclusions

  1. With the exceptions listed in IRM 4.71.19.3 (2), FTS is generally available for the following non-docketed EP cases:

    1. Form 5330 exams

    2. Form 990-T exams

    3. Form 1040/1120 discrepancy adjustments

    4. Penalties related to Forms 5330, 990-T or 1040/1120 discrepancy adjustments

  2. FTS is generally not available for the following EP cases:

    1. Cases involving qualification issues under IRC 401(a)

      Note:

      These cases should be resolved through EPCRS or through a DO 8-3 closing agreement. See IRM 4.71.3.3, Closing Agreements.

    2. Cases in which the taxpayer has failed to respond to IRS communications and no documentation has been previously submitted for consideration

    3. Cases that are Listed Transactions or Abusive Tax Avoidance Transactions (ATATs)

    4. Cases in which Appeals has no jurisdiction (e.g., IRC 6700 penalty cases)

    5. Cases specifically excluded from FTS, by the IRS Commissioner, Chief Counsel or by a Director in EP

    6. Correspondence exams worked solely from a Campus site

    7. TEFRA partnership cases

    8. Issues under consideration for litigation or designated for litigation

    9. Cases involving potential for civil or criminal fraud

    10. "Whipsaw" issues (i.e., issues for which resolution with respect to one party might result in inconsistent treatment in the absence of the participation of another party)

FTS Application Process

  1. The taxpayer, the examining agent, or the group manager may initiate an application to the FTS process at any time after an issue has been fully developed, but before a 30-Day letter is issued.

  2. A taxpayer that is interested in participating in FTS, or that has questions about the program and its suitability for the taxpayer's case, should contact the examining agent or their manager to discuss resolution of an issue for the period(s) currently under examination.

  3. In order to participate in FTS, the taxpayer must consent, pursuant to IRC 6103(c), to the disclosure of the taxpayer's returns and return information pertaining to the issues being considered in the FTS process to those persons named on Form 14017, Application for Fast Track Settlement.

  4. To apply for the FTS program, the taxpayer should submit a completed and signed Form 14017.

  5. Before Form 14017 can be submitted to Appeals:

    1. The examining agent must write up all unagreed issues to be submitted in the FTS process, in a Revenue Agent Report (RAR) prepared in accordance with IRM 4.71.4.4.5(4) (Form 1040/1120), IRM 4.71.5.9.1.1 (Form 5330), or IRM 4.71.10.5.2 (Form 990-T).

    2. The taxpayer must prepare a full written response explaining their position on each issue.

    Note:

    Form 14017, the RAR and the taxpayer's written position are collectively referred to as the FTS Submission Package.

  6. The FTS Submission Package will be reviewed by both the EP group manager and the EP Area Manager (or designee) before it is sent to Appeals.

  7. Once approved by the group manager and Area Manager, the EP agent will email the FTS Submission Package to the Appeals FTS Program Manager using the following email address: *AP TEGE FTS.

  8. Submission of the approved and signed Form 14017 to the Appeals FTS Program Manager must be done within 5 business days of receipt.

  9. The Appeals FTS Program Manager (or designee) will review the FTS Submission Package.

  10. If the case is accepted for inclusion in FTS, the Appeals FTS Program Manager (or designee) will:

    1. Contact the taxpayer to inform them that the case has been accepted for FTS.

    2. Contact the EP group manager to inform him/her that the case has been accepted for FTS.

    3. Assign an FTS Appeals officer who will act as the FTS Appeals Official (FTS AO) to help resolve the case.

    Note:

    This must be done within three business days of receipt of the FTS Submission Package in Appeals.

  11. If the case is rejected for inclusion in FTS, the Appeals FTS Program Manager (or designee) will:

    1. Contact the EP group manager to inform him/her that the case has been rejected for FTS.

    2. Contact the taxpayer both by telephone and in writing to inform them that the case has been rejected for FTS.

    3. Discuss other dispute resolution opportunities with the taxpayer, including 30-Day letter procedures and the taxpayer's normal Appeal rights.

    Note:

    This must be done within three business days of receipt of the FTS Submission Package in Appeals.

    Note:

    The decision not to accept a case into the FTS program is not subject to administrative appeal or judicial review.

  12. During the FTS process the agent is responsible for the protection of the statute of limitations.

Settlement Process for Cases Accepted in FTS

  1. If the case is accepted for inclusion in FTS, the FTS AO:

    1. Will contact the EP group manager (or EP agent) and the taxpayer to set up a meeting to discuss resolution of the case and stress that the decision makers must be present.

      Note:

      This meeting is referred to as the FTS Session.

    2. Will schedule the FTS Session at the date and location agreed to by both parties.

      Note:

      Due to IRS budget considerations, a face-to-face meeting at the taxpayer’s closest IRS office cannot be assured for all FTS cases. In such cases, it may be necessary to conduct the conference telephonically or by other means.

    3. Will meet with the taxpayer (and/or their representative), the EP group manager (or designee) and the agent at the FTS Session.

    4. Will serve as a neutral party at the FTS Session.

    5. Does not perform in a traditional Appeals role, but uses dispute resolution techniques to facilitate settlement between the parties.

  2. In FTS, both parties retain the right to withdraw throughout the entire FTS process. A party wishing to withdraw should provide written notice to the FTS AO and the other party.

  3. At least one person with decision-making authority from both the taxpayer and EP must be present during the FTS session.

  4. The FTS Session may also include other individuals with decision making authority and the information and expertise necessary to assist the parties during the settlement process.

  5. The FTS AO may ask the taxpayer and the agent to limit the number of participants at the FTS Session to facilitate the process.

  6. IRS employees, the taxpayer, and persons invited to participate by the IRS or the taxpayer shall not voluntarily disclose information regarding any communication made during the FTS Session, except as provided by statute.

  7. Prior to the FTS Session, the FTS AO will advise the participants of the procedures and establish ground rules.

  8. The FTS Session may include joint sessions with all parties, separate meetings, or both as determined appropriate in the sole judgment of the FTS AO.

  9. The FTS AO may modify the rules and procedures during the FTS Session to adapt to changes in circumstances.

  10. The taxpayer is not required to have a representative to participate in the FTS process, but if they do, this individual must have a valid power of attorney from the taxpayer (Form 2848, Power of Attorney and Declaration of Representative).

  11. During the FTS Session, the FTS AO will prepare the FTS Session Agenda and the FTS Session Report and provide both parties with copies.

    1. The FTS Agenda will guide the communication in the FTS Session, set the order of issue discussion, and pose questions to clarify the issues.

    2. The FTS Report will include a list of all issues approved for the FTS program, a description of the issues, the amounts in dispute, conference dates, a plan of action for the FTS Session and other information useful to the process as determined by the parties and the FTS AO.

      Note:

      The FTS Report will be updated after the FTS Session with the developments of the session.

  12. Generally, the FTS AO will consider only those issues outlined in the FTS Report, except by mutual agreement of the parties.

  13. If the taxpayer presents information during the FTS Session that the taxpayer had not previously presented during the audit, the FTS AO will adjust the targeted completion date to give the appropriate IRS officials time to evaluate the information.

  14. During the FTS Session, the FTS AO may propose settlement terms for any or all issues, and may consider settlement terms proposed by either party.

  15. If the parties resolve any disputed issue at the conclusion of the FTS Session:

    1. The parties and the FTS AO shall sign the FTS Report acknowledging acceptance of the terms of settlement for purposes of preparing computations, and

    2. The case will be processed under normal case processing procedures.

    Note:

    The signature of the parties on the FTS Report does not constitute a final settlement, nor does it waive restrictions on assessment, terminate consents to extend periods of limitation, start the running of any periods of limitation, or constitute agreement to close the case.

  16. If the taxpayer accepts the FTS AO’s settlement proposal, but the EP group manager rejects it, the EP Area Manager must review the settlement proposal and either concur in writing with the rejection or accept the settlement proposal on behalf of EP.

    1. If the Area Manager accepts the settlement proposal, the case will be processed under established procedures for an agreed case.

    2. If the Area Manager concurs with the group manager’s rejection of the settlement proposal, and an acceptable alternative settlement cannot be reached, the issue will be closed out of the FTS program as unagreed.

  17. If the parties cannot reach an agreement, the case will be processed under normal "unagreed" procedures.

    1. See IRM 4.71.4.6, Unagreed Case Procedures, for unagreed Form 1040/1120 procedures.

    2. See IRM 4.71.5.9, Unagreed Cases, for unagreed Form 5330 procedures.

    3. See IRM 4.71.10.5, Unagreed Cases, for unagreed Form 990-T procedures.

    Note:

    If the parties fail to resolve any issue in FTS, the taxpayer retains the option of requesting that the issue be heard through the traditional Appeals process.

  18. A resolution reached by the parties through the FTS process will not bind the parties for taxable periods or issues not covered by the FTS agreement, unless such taxable periods or issues are addressed expressly in a closing agreement reached as part of the FTS process.

  19. If applicable, the IRS will report a proposed resolution reached as a result of EP FTS to the Joint Committee on Taxation in accordance with IRC 6405.

    1. The IRS may reconsider a proposed settlement, as reflected in a signed FTS Session Report, upon receipt of comments on the proposed settlement from the Joint Committee on Taxation.

    2. If the taxpayer declines to agree with any changes by the IRS upon reconsideration, EP will close the case unagreed, and the taxpayer will retain all the usual rights to request Appeals consideration of any unagreed issues.