| The IRS recently released Revenue Procedure | | | | unbiased third party to handle an IRS appeal?" |
| 2006-44, which sets out the rules for the finalized IRS | | | | Second, if the IRS and taxpayer agree to enter into |
| Appeals Arbitration program. This new program | | | | arbitration, what happens to the statute of limitations |
| presents some new opportunities that taxpayers must | | | | for the IRS to assess additional taxes or for the IRS to |
| consider. | | | | collect taxes? For example, the statute of limitations |
| The new IRS Appeals Arbitration program provides | | | | for collecting the underlying tax is suspended if the |
| yet avenue to appeal factual issues that are cannot | | | | case is before the IRS Appeals Office pursuant to a |
| be resolved by the IRS appeals process. The program | | | | collection due process hearing request. Is the IRS going |
| is not available for legal issues, issues that the IRS | | | | to merely not issue a final determination in the |
| wants to litigate, and some collection issues. The | | | | collection due process hearing until after the arbitration |
| program is available for factual issues related to | | | | hearing in order to extend the statute of limitations for |
| rejected offers in compromise and responsible | | | | collection beyond what is already provided for? If this |
| persons for purposes of the trust fund recovery | | | | is the case, is the IRS going to notify taxpayers about |
| penalty. | | | | this issue in advance? |
| Both the taxpayer and the IRS must mutually agree to | | | | Can taxpayers use this program to delay IRS |
| submit to arbitration and the issues, questions, and | | | | collection efforts? We all know that taxpayers are |
| amounts can be limited in the arbitration agreement | | | | going to try this, yet the IRS Revenue Procedure does |
| between the IRS and the taxpayer. | | | | not provide any guidance on this. Does this invite |
| The taxpayer may initiate arbitration by submitting a | | | | taxpayers to use this new program to delay IRS |
| written request, after consulting with the IRS appeals | | | | collections? |
| office that is handling the case. The Revenue | | | | By the way, are IRS collection efforts going to be |
| Procedure specifies that the Appeals Team Manager | | | | suspended during the time that the arbitration hearing is |
| "will" respond within two weeks (this is somewhat | | | | pending (my guess is that in most cases it will not be |
| humorous, as it often takes months for a team | | | | suspended). |
| manager to even return a phone call). | | | | Third, can taxpayers use the new procedure as a |
| The IRS Revenue Procedure says that IRS refusal to | | | | sword and not merely a shield? For example, can |
| arbitrate is not subject to judicial review (which may or | | | | taxpayers use the arbitration proceeding to get a ruling |
| may not be true). | | | | that the IRS's position had no basis in fact or law to |
| The Revenue Procedure then says that after the IRS | | | | entitle the taxpayer to an award of attorney fees? Or |
| okay's the request to arbitrate, the parties "will" enter | | | | can taxpayers get a ruling that an IRS employee has |
| into a written agreement to arbitrate. The Procedure | | | | violated our tax laws and/or IRS policy (such as the |
| does not specify what happens if the parties cannot | | | | Revenue Restructuring Act of 1998) which requires |
| agree on the arbitration terms. | | | | that the IRS employee be fired? |
| The parties can then select an arbitrator, which can be | | | | Even with these questions, the new program may be |
| an IRS Appeals Officer from a different Appeals | | | | helpful for taxpayers who find themselves unable to |
| Office or an outside third party who is registered with | | | | get a fair appeals hearing because the IRS appeals |
| "any local or national organization that provides a | | | | officer has failed to comply with our tax laws and/or |
| roster of neutral [arbitrators]." (Just FYI: I might be willing | | | | IRS policy. I personally have worked a number of |
| serve as an arbitrator in this type of proceeding, so | | | | cases where the IRS appeals employees' have failed |
| please contact me if you need this service). The | | | | to give any consideration to any law or fact (In fact, in |
| Revenue Procedure also provides that the IRS and | | | | one case I had an IRS appeals employee tell me that |
| the taxpayer are to pay for the cost of arbitration, | | | | she would not consider anything that was presented |
| regardless of which party prevails. | | | | and she was going to deny the taxpayers claim - and |
| This new program raises a number of issues. First, this | | | | that was before the taxpayer had an opportunity to |
| new program seems to be an admission by the | | | | submit any evidence, make any arguments, or even |
| government that the IRS Appeals process is flawed. | | | | say one word). |
| By law, the IRS Appeals Office is supposed to provide | | | | While this new proceeding might be helpful in these |
| an independent third party review. There are even | | | | types of cases, my guess is that the IRS will simply |
| specific prohibitions on ex parte communications | | | | refuse any request to arbitrate in these types of |
| between the IRS and the IRS Appeals Office, etc. | | | | cases - i.e., the types of cases for which the program |
| That begs the question of "why the unbiased third | | | | was intended for. |
| party IRS Appeals Office needs to bring in an | | | | |