IRS Chief Counsel to Combine Large, Small Business Divisions

The IRS announced on September 18 that the Large Business & International (LB&I) and Small Business/Self-Employed (SB/SE) Divisions will be combined to form a new legal organization — Division Counsel, Litigation and Advisory (L&A) — effective October 6, 2024.

According to a statement from the agency, recent legislation — the Taxpayer First Act of 2019 (P.L. 116-25) and the Inflation Reduction Act of 2022 (P.L. 117-169) — prompted Chief Counsel to review its current field structure. The move will “better support” the IRS’ organizational goals and provide “more consistent legal positions in litigation,” read the statement.

Chief Counsel generally serves as the legal advisor to the IRS commissioner on the interpretation, administration, and enforcement of the Tax Code. The new L&A Division’s leadership team will be comprised of Division Counsel Robin Greenhouse, Deputy Division Counsel (Operations) Joseph Spires, and Deputy Division Counsel (Technical) Charles Pillitteri.

“The consolidation of the LB&I and SB/SE Division Counsel is designed to address Counsel specific issues and priorities and to provide exceptional service to the IRS client,” the agency commented to Checkpoint. “The L&A Division will expand client service through innovation by streamlining, standardizing, and eliminating duplicative practices. Additionally, the L&A Division will have a clear line of sight into litigation and advisory work across the country and ensuring consistency in legal positions.”

The Taxpayer First Act directed the IRS to develop plans for improving the “taxpayer experience” by creating modernized digital tools and self-service online account features. Additionally, the agency committed to a strategy for training and developing its workforce, as well as another roadmap focused on streamlining internal functions through an organizational redesign with the purpose of expediting communication with taxpayers and practitioners and case resolution. Per the latest IRS Data Book, in fiscal year 2023 Chief Counsel closed over 65,60 cases and received nearly 55,000 more. During the same period, more than 34,700 Tax Court cases involving $5.5 billion in disputed taxes and penalties were closed.

This three-pronged approach was illustrated in a January 2021 Report to Congress on how the IRS planned to implement the Taxpayer First Act, complete with benchmarks for new initiatives and how it intended to measure success in meeting its goals.

These strategies were later updated ported over into the IRS’ Strategic Operating Plan (SOP), a 10-year vision through fiscal 2031 for spending the $80 billion in additional funding on top of its regular annual appropriations initially authorized by the Inflation Reduction Act. Since the bill’s enactment, this spending pool was partially clawed back as a result of multiple legislative actions and negotiations between Congress and President Biden.

Currently, the total Inflation Reduction Act appropriation to the IRS is less than $60 billion, but the agency has been utilizing the funds to fulfill various projects reflected in the SOP and the prior Taxpayer First Act strategies. These range from compliance enforcement campaigns to taxpayer-facing online enhancements and systems upgrades. The IRS plans to release annual updates on SOP progress, and the first was issued in May.

But the upcoming Chief Counsel reorganization is the biggest restructure to date since the SOP was issued in April 2023. This year, Marjorie Rollinson became the new head of Chief Counsel, the first woman to hold the position. In June, the IRS announced a new dedicated group will be established later in the fall within LB&I tasked with bolstering tax compliance of pass-through entities.

The group will work with a new Chief Counsel office focusing on complex partnerships to coordinate guidance and sealing tax loopholes commonly utilized by high-income taxpayers through abusive transactions, a key area of interest signaled by the IRS.