IRS RESPONSE TO RECOMMENDATION: ​In the past, taxpayers could avail themselves of an in-person conference only in specific situations. As a result of TAS’s recommendations, however, and Appeals’ desire to provide high-quality service to taxpayers, in-person conferences are now available as a matter of right, including to taxpayers whose cases are worked in the campuses. The timing and location of these in-person conferences are determined based on the reasonable convenience of the parties. In addition, letters to taxpayers now include manager contact information to ensure taxpayers’ procedural requests are honored. Appeals is committed to reemphasizing to our employees, both through training and other outreach, that in-person availability is a priority. Further, we are hiring personnel to improve our staffing in states with little or no Appeals presence.

CORRECTIVE ACTION: Appeals is committed to reemphasizing to our employees, both through training and other outreach, that in-person availability is a priority. Further, we are hiring personnel to improve our staffing in states with little or no Appeals presence.

TAS RESPONSE: TAS commends Appeals for making in-person conferences available to taxpayers as a matter of right, including manager contact information on letters to taxpayers, reemphasizing the priority of in-person conferences to its employees, and focusing hiring efforts in states with little or no Appeals presence. These efforts should reduce wait times for taxpayers seeking an in-person conference, increase overall access to face-to-face settlement opportunities, and bolster taxpayer rights to quality service and a fair and just tax system.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): Ongoing

IRS RESPONSE TO RECOMMENDATION:

Appeals continues to believe, as does TAS, that access to Appeals specialists should be available on those coordinated issues that require an Appeals specialist review and concurrence in the mode most beneficial to ensuring that taxpayers’ arguments are fairly heard, analyzed, and responded to so that taxpayers can be assured that their unique facts and circumstances are addressed in their administrative appeal. For the majority of the 30 ACI R&C issues (19 domestic tax issues and 11 international tax issues), Appeals specialists already attend taxpayer conferences, and we anticipate that they will continue to do so.

Appeals is in the process of finalizing a study of issue coordination practices, which includes issues that require Appeals specialist review and concurrence. To guide this process, Appeals solicited and received written feedback from internal and external stakeholders, including tax practitioners, IRS Counsel, IRS Compliance employees and Appeals employees (i.e., Appeals Officers, Appeals Team Case Leaders, Appeals managers, and Appeals specialists). Appeals also conducted listening sessions with these stakeholders. As part of that study, cognizant of taxpayer and TAS feedback, Appeals is looking specifically at access to Appeals specialists.

As we await the outcome of that study, Appeals will continue to balance several factors in managing a national program of specialists that frequently serve taxpayers that are not geographically located with the assigned specialists. In doing so, Appeals must balance the requests of taxpayers, the needs of the individual issues in the case, and management of its overall caseload. When determining the type of Appeals specialist participation (i.e., in person or virtual), Appeals considers such factors as whether the specialist involvement in the case is due to a coordinated issue, the suitability and capability of the individual issue for discussion in a virtual or hybrid conference, how quickly an in-person conference with all advisable participants can be arranged, as well as the delays to other cases that could result from extensive travel times.

CORRECTIVE ACTION: Appeals is in the process of finalizing a study of issue coordination practices, which includes issues that require Appeals specialist review and concurrence. As part of that study, cognizant of taxpayer and TAS feedback, Appeals is looking specifically at access to Appeals specialists.

TAS RESPONSE: TAS appreciates that Appeals seeks to balance various interests in managing its national program of specialists but regards the interest and statutory rights of the taxpayer as paramount. If taxpayers believe that the Appeals employee either making or significantly influencing the ultimate decision on a given case remains “behind a curtain” and inaccessible, the perception that Appeals is independent more in name than in practice will persist, continuing the erosion of taxpayer trust. Appeals should prioritize taxpayer rights and perceptions of independence in balancing the multiple interests of its national program of specialists.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): Ongoing

IRS RESPONSE TO RECOMMENDATION: Assuming a congressional grant of hiring authority and the allocation of the requisite budget, Appeals is in favor of hiring its own attorneys. On the other hand, we do not see a good value proposition in reallocating existing funds to contract with outside experts, as opposed to increasing our own staffing. Appeals’ specialists, who provide expert analysis on complex issues, share with AOs and ATCLs a common mission of settling cases fairly and in light of the hazards of litigation. To this end, our in-house experts look at cases through a similar lens as our decisionmakers, whereas contracted outside experts may not share that settlement-focused, independent perspective. We are also concerned that outside contracting could cause delay and have other negative unintended consequences.

CORRECTIVE ACTION: N/A

TAS RESPONSE: Independent functions within an administrative agency need advice that is independent of the main agency and its positions. This includes legal advice. IRS Chief Counsel’s “one voice” position prevents its presentation of advice to Appeals that is wholly independent from the IRS’s position. Because independence is at the heart of Congress’s mandate to Appeals, it should both allocate existing resources and petition for requisite increases to abide by this mandate of independence. While in-house Appeals experts look through the same lens, TAS reasserts its opinion that outside experts will provide a diverse point of view to strengthen both the perception and reality of Appeals’ independence in its settlement decisions.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

IRS RESPONSE TO RECOMMENDATION: 

As part of the appeals conference, Appeals hears taxpayers’ positions, understands the legal and factual considerations informing taxpayers’ disputes with the IRS, and proposes resolutions. At the conclusion of this inherently collaborative process, taxpayers and their representatives should have a clear understanding of exactly how and why their cases were resolved. In other words, conferences should leave no ambiguities that require additional explanation from Appeals to taxpayers and their representatives.

By contrast, Compliance is generally not present for settlement discussions. Appeals shares ACMs memorializing case resolutions with Compliance so that Compliance can also understand the reasons for the settlement reached between taxpayers and Appeals. ACMs, however, have no precedential value and serve a purely informational purpose. Further, per IRM 8.1.1.6.4, Requests for Appeals to Produce Records (Feb. 10, 2012), ACMs would have to be coordinated with Area Counsel and the local Disclosure Officer before release to taxpayers, which would further burden already limited resources.

Sharing ACMs with taxpayers and representatives would not tell them anything they don’t already know. Nevertheless, Appeals is aware of TAS’s views on this subject continues to evaluate the issue.

CORRECTIVE ACTION: N/A

TAS RESPONSE: TAS appreciates the care that Appeals puts into taxpayer conferences, including the emphasis on negotiation and the importance of communicating Appeals’ rationale for a settlement. TAS also appreciates that Appeals desires that every conference will be robust enough to cover all issues in depth so that there’s no ambiguity. And yet, it is part of the human condition that not everyone fully retains in their memories every detail and nuance one hears in an arguably tense situation. This is true of the medical profession, which provides in-depth written information to patients after a consultation even though the medical professional has covered everything in-person. Appeals conferences are arguably just as tense for taxpayers, necessitating by common sense and best practice a written document that covers all the issues and rationales for an Appeals’ decision in addition to a conference. Since, as Appeals points out, there is nothing in the ACM that has not been discussed in an Appeals conference, the ACM is the most logical written document to provide a taxpayer as a matter of quality service and transparency. Since the ACM concerns the taxpayer, there are no disclosure concerns that would violate the taxpayer’s privacy if Appeals only provides the ACM to the taxpayer or representative.

While TAS agrees with Appeals that ACMs are not precedential, we are unclear how this justifies a refusal to provide a written document to a taxpayer that memorializes Appeals’ decision and rationale. Taxpayers still have the right to be informed, regardless of the precedential nature of a document.

TAS looks forward to working with Appeals as it continues to evaluate this issue.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

IRS RESPONSE TO RECOMMENDATION: ​Appeals is making efforts to increase our hiring from outside of the IRS as a means of reversing the understaffing with which we have grappled for years. Appeals also believes it is good for the overall organizational evolution and public service to welcome a diversity of experiences and viewpoints to ensure Appeals does not become overly rigid in its analysis of litigating hazards. Adding external-to-the-IRS hires can only broaden the base of organizational experience and viewpoints and is an important part of our overall hiring strategy. As a result, we agree with TAS’s recommendation.

However, Appeals objects to the fundamental premise underlying this recommendation: that there is something wrong with also hiring from among other IRS operating division employees. TAS itself routinely hires from the Compliance side of the IRS, trusting that its own training and culture, as well as the professionalism of the employees being hired, will not compromise the independence of TAS. The same proposition is equally true for IRS personnel hired by Appeals. Our culture and our training emphasize independence, and we expect the professionals we hire to be neither pro-taxpayer, nor pro-IRS, regardless of their previous place of employment. Independence is a common denominator we seek from all those who join Appeals.

CORRECTIVE ACTION: Appeals is making efforts to increase our hiring from outside of the IRS as a means of reversing the understaffing with which we have grappled for years.

TAS RESPONSE: TAS appreciates the care that Appeals puts into its hiring and training efforts. We agree that fully implementing this recommendation should reduce the perception of a compliance culture and introduce outside perspectives and experiences within the IRS Independent Office of Appeals.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): Ongoing

IRS RESPONSE TO RECOMMENDATION: By “continuous training,” Appeals assumes that TAS means regular education, reemphasized at reasonable intervals, regarding a judicial attitude toward settlement. If such is the case, Appeals agrees with TAS’s recommendation. Appeals’ training for new hires stresses the importance of independence and consideration of the hazards of litigation. Likewise, Appeals provides extensive ongoing education and messaging for existing employees through formats such as executive town halls, advanced training, annual meetings with Counsel to discuss case law, and weekly updates on recent case decisions for individual workstreams. All of these reinforce the role of hazards settlements and perpetuate a judicial mindset to the resolution of cases.

CORRECTIVE ACTION: Appeals’ training for new hires stresses the importance of independence and consideration of the hazards of litigation. Likewise, Appeals provides extensive ongoing education and messaging for existing employees through formats such as executive town halls, advanced training, annual meetings with Counsel to discuss case law, and weekly updates on recent case decisions for individual workstreams. All of these reinforce the role of hazards settlements and perpetuate a judicial mindset to the resolution of cases.

TAS RESPONSE: A judicial attitude within Appeals will facilitate independent settlements and reduce taxpayer perception of a compliance mindset. TAS continues to stress the importance of not only hiring Appeals employees with diverse and independent perspectives but frequently refreshing employee training on judicial attitudes in independently reviewing cases and conducting conferences.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

IRS RESPONSE TO RECOMMENDATION: In response to GAO 23-105552, published in May 2023, and as part of SOP Initiative 2.4, the IRS has taken several steps to improve its ADR procedures. Among other things, we have stood up an ADR Program Management Office within Appeals to oversee and coordinate IRS-wide Alternate Dispute Resolution (ADR) efforts and data collection.

The ADR improvements that are in process include: removing barriers to participating in Post-Appeals Mediation; allowing Appeals to mediate/resolve disputes earlier in the audit or collection process; making it easier for taxpayers to get their cases into ADR by increasing the types of cases and issues that are eligible; requiring a higher-level review if taxpayers’ requests for ADR are not accepted; and streamlining and clarifying existing guidance.

CORRECTIVE ACTION: The ADR improvements that are in process include: removing barriers to participating in Post-Appeals Mediation; allowing Appeals to mediate/resolve disputes earlier in the audit or collection process; making it easier for taxpayers to get their cases into ADR by increasing the types of cases and issues that are eligible; requiring a higher-level review if taxpayers’ requests for ADR are not accepted; and streamlining and clarifying existing guidance.

TAS RESPONSE: Appeals’ agreement to implement all the elements of this TAS recommendation is laudable given the enormity of the lift. This includes restructuring the current ADR process to provide (a) an ability to appeal the initial determination to Compliance upper management, (b) the creation of a centralized group within Appeals responsible for reviewing Compliance denials of ADR requests, (c) clearer guidance on issues excluded from ADR consideration, and (d) a written explanation to taxpayers citing the basis for the denial. We understand that this implementation will take time, and TAS stands ready to assist Appeals at each step of its IRS-wide ADR restructuring effort.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): Ongoing

IRS RESPONSE TO RECOMMENDATION: The ADR Program Management Office, discussed above, has a variety of responsibilities. One of these is to work with Compliance to collect a range of ADR-related data, including the types specified by TAS in its recommendation.

CORRECTIVE ACTION: The ADR Program Management Office has a variety of responsibilities. One of these is to work with Compliance to collect a range of ADR-related data, including the types specified by TAS in its recommendation.

TAS RESPONSE: As identified in GAO Report 23-105552, data collection and analysis are the best next steps for Appeals in restructuring the IRS’s ADR process. TAS looks forward to helping Appeals analyze this data and identify barriers to taxpayers fully participating in ADR programs.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): Ongoing