Announcement 93-144: early referral of issues to appeals and the role of appeals in the competent authority process.

• Position: Tax Executives Institute IRS Administrative Affairs Committee

On January 27, 1994, Tax Executives Institute filed the following comments with the Internal Revenue Service on Announcement 93-144, relating to the procedures for early referral of issues to Appeals and for requesting Appeals involvement in Competent Authority issues. The Institute's comments were prepared under the aegis of the Institute's IRS Administrative Affairs Committee, whose chair is Robert D. Adams of Halliburton Company, and its International Tax Committee, whose chair is Lisa Norton of the Ingersoll-Rand Co. (On January 28, 1994, Mr. Adams testified at an IRS public hearing on Announcement 93-144.)

Tax Executives Institute is pleased to offer the following comments on Announcement 93-144, relating to the procedures for early referral of issues to Appeals and for requesting Appeals involvement in Competent Authority issues. The announcement was published in the December 6, 1993, issue of the Internal Revenue Bulletin (1993-39 I.R.B. 12). A public hearing on the procedures is scheduled for January 28, 1994.

1. Introduction

   TEl commends the IRS for developing the Early Referral and Competent Authority procedures set forth in Announcement 93-144. As an organization dedicated to sound tax administration, TEI has long been concerned about the amount of time it takes to process a case through the IRS administrative process and through Competent Authority. The Institute has worked with the IRS on several projects (such as the Accelerated Issue Resolution procedure) that would expedite the process. The time it takes to shepherd a case through Examination and Appeals (and, if necessary, Competent Authority) is a major drain on the resources of the taxpayer and government alike.

   The Early Referral procedure outlined in Announcement 93-144 would permit taxpayers to resolve cases more quickly by requesting a specific issue be referred to Appeals for early resolution. Early resolution of a particular issue could make both the taxpayer and the Examination personnel more amenable to resolving other issues involved in the case. In this regard, the inclusion of Industry Specialization issues within the ambit of the Early Referral proposal should prove especially salutary. We also commend the announcement's drafters for confirming that the Early Referral of an issue will not trigger the "hot interest" provisions of section 6621(c). Had the announcement been silent on the issue or reached the opposite conclusion, taxpayers would clearly have been reluctant to invoke the Early Referral procedure.

   The Competent Authority procedure would permit taxpayers to request the involvement of Appeals in the competent authority process. This should improve taxpayers' access to Competent Authority in treaty countries, by producing positions more susceptible to agreement by a treaty country's Competent Authority and having the U.S. Competent Authority become involved before the foreign statute of limitations runs.

   The Institute believes that, in appropriate cases, the new procedures will advance the IRS's goal of shortening the time required for resolving tax disputes. We applaud the IRS's efforts to enhance the efficiency and effectiveness of these processes.

2. Taxpayer Involvement

   in the Process

   TEI believes that flexibility should be the hallmark of the procedures. The announcement should clearly state that taxpayers have a choice...