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IRS will update its procedures for administrative appeals of docketed cases

Notice 2015-72, 2015-44 IRB

In a Notice, IRS has provided a proposed revenue procedure which will update its published description of the IRS administrative appeals process in cases docketed in the Tax Court.

Background. Prop Reg § 601.106(c)(3) and Rev Proc 87-24, 1987-1 CB 720, describe IRS’s administrative appeals process in cases docketed in the Tax Court.

The Office of Chief Counsel (Counsel) is charged with the responsibility of representing IRS in cases docketed in the Tax Court. (Code Sec. 7452, Code Sec. 7803(b)(2)(D))

The Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, requires IRS to “ensure an independent appeals function” within IRS.

Under Rev Proc 2012-18, 2012-1 CB 455, Counsel and Appeals share a responsibility to interact—in all circumstances—in a manner that preserves and promotes Appeals’ independence.

New proposed revenue procedure. New Notice 2015-72 contains a proposed revenue procedure that will update Rev Proc 87-24 to more accurately reflect the procedures utilized in managing the flow of docketed cases between Appeals and Counsel.

IRS says that the intent of the proposed revenue procedure is to ensure that docketed cases are handled consistently nationwide and that it is not intended to materially modify the practice of referring docketed cases to Appeals for settlement currently utilized in the vast majority of cases.

RIA observation: Notwithstanding the above statement by IRS regarding its intention not to modify that current practice, the proposed revenue procedure does contain significant changes from Rev Proc 87-24.

The revenue procedure, when issued, will supersede Rev Proc 87-24.

The administrative procedures contained in the proposed revenue procedure. The new procedures include the following:

…Except as provided below under “Circumstances under which Counsel will not refer docketed cases to Appeals,” Counsel will refer docketed cases to Appeals for settlement consideration.
…If Appeals issues a notice of deficiency or makes a determination without having fully considered one or more issues because of an impending expiration of the statute of limitations on assessment, Appeals may include a request in the administrative case file for Counsel to return the case to Appeals for full consideration of the issue or issues once the case is docketed in the Tax Court.
…Counsel will refer a docketed case to Appeals within 30 days of the case becoming “at issue in the Tax Court” (as defined by Tax Court Rule 38). Counsel may, with manager approval, delay forwarding a docketed case to Appeals if Counsel identifies a need for additional time. A delay of more than 90 days (120 days from when the case is at issue) requires approval of a Counsel executive. If a delay of more than 90 days is approved, Counsel will discuss with Appeals the need for the delay and when Counsel expects to forward the case to Appeals for settlement consideration.
…When a docketed case is forwarded to Appeals for consideration, Appeals has the sole authority to resolve the case through settlement until the case is returned to Counsel.
…In any docketed case proceeding as a small tax case under the provisions of Code Sec. 7463, Appeals will return the case to Counsel six months after the case is received by Appeals, or earlier, if necessary, so that it is received by Counsel no later than three weeks prior to the date of the calendar call. In all other cases, Appeals will return the case to Counsel when Appeals concludes that the case is not susceptible to settlement or within 10 days after the case appears on a trial calendar, whichever is sooner. In all cases, Counsel and Appeals may agree to extend the time for Appeals to consider a case if settlement appears reasonably likely.
…In all docketed cases transferred to Appeals, Counsel may request that Appeals return the case (including settlement authority) to Counsel before Appeals has completed its consideration of the case under its settlement authority if Counsel determines that it is needed for trial preparation.

Circumstances under which Counsel will not refer docketed cases to Appeals. If any of the following apply, Counsel will not refer a docketed case (or, in some cases, an issue in a docketed case) to Appeals for settlement consideration:

1. Appeals issued the notice of deficiency or made the determination that is the basis of the Tax Court’s jurisdiction;
2. The taxpayer forgoes settlement consideration by Appeals;
3. The case or issue has been designated for litigation by Counsel;
4. In limited circumstances, if Division Counsel or a higher level Counsel official determines that referral is not in the interest of sound tax administration. For example, Counsel may decide not to refer a docketed case to Appeals in cases involving a significant issue common to other cases in litigation for which it is important that IRS maintain a consistent position or in cases related to a case over which the Department of Justice has jurisdiction;
5. Cases docketed under Code Sec. 6015(e)(1)(A)(i)(II) (certain Tax Court innocent spouse cases), Code Sec. 6110 (public inspection of IRS determinations), Code Sec. 6320 and Code Sec. 6330 (hearings with respect to liens and levies), Code Sec. 6402 (IRS authority to make credits or refunds), Code Sec. 7428 (declaratory judgments regarding exempt organizations), Code Sec. 7476 (declaratory judgments regarding retirement plans), Code Sec. 7477 (declaratory judgments regarding the value of certain gifts), Code Sec. 7478 (declaratory judgments regarding certain governmental obligations), and Code Sec. 7479 (declaratory judgments regarding eligibility to defer estate tax payments); or
6. Cases docketed under Code Sec. 6213(a) (Tax Court petition), with respect to Code Sec. 6015 (innocent spouse) relief raised for the first time in the petition.

With respect to items (3) and (4) above, if Counsel determines that a docketed case or issue will not be referred to Appeals, Counsel will notify the taxpayer that the case will not be referred to Appeals.

Effective date. The revenue procedure will be applicable to all docketed Tax Court cases that are pending on or after the date the revenue procedure is released to the public.

References: For referral of docketed cases to Appeals, see FTC 2d/FIN ¶  T-1902; United States Tax Reporter ¶  76,557.401; TaxDesk ¶  832,003; TG ¶  70303.

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