Elevating Examination Concerns Within the New LB&I.

• Author: Sereti, Rosemary
• Position: IRS Large Business and International Division

The Expert: Rosemary Sereti

For contentious U.S. federal tax issues, tax controversy management tends to follow a horizontal path from examination to appeals and finally litigation. The likelihood of being embroiled in a contentious issue increased recently as the Internal Revenue Services Large Business & International (LB&I) Division announced another round of campaigns. Campaign may suggest the IRS is taking a combative approach, but if budget constraints continue, the IRS may be more receptive to taxpayers and practitioners using provisions in the Internal Revenue Manual (IRM) as an opening to a more collaborative approach to resolving tax controversy matters.

Question: How can tax executives use their knowledge of the organizational structure of LB&I and the IRM to efficiently and effectively manage U.S. federal tax controversy?

Answer: Now more than ever, taxpayers and in-house professionals need to understand the quasi-matrix organizational structure of the LB&I division. In a previous issue of Tax Executive magazine the authors discussed the reorganization of LB&I, asking, "What happened to transparency and collaboration?" They suggested that LB&I was becoming more militaristic by launching campaigns. (1) Even if campaign is typically used in military jargon, the IRM hints at a conciliatory approach to examinations. To better understand the principles of collaboration that are detailed in IRM 4.46.1.4, tax executives should become familiar with the organizational structure of LB&I, as this familiarity can be used to manage tax controversy efficiently and effectively at the examination level.

LB&I's Organizational Structure

On February 25, 2016, LB&I released Publication 5125, titled the Large Business & International Examination Process (LEP). The LEP sets forth an organizational approach for conducting professional examinations and replaces Publication 4837, Achieving Quality Examinations Through Effective Planning, Execution, and Resolution (or QEP), which mentioned LB&I's Rules of Engagement. Publication 5125 no longer mentions such rules, instead persistently using the terms collaborate and collaborative manner. With such terms in mind, tax executives should reacquaint themselves with IRM 4.46.1.4 (Principles of Collaboration) and IRM 4.46.1.4.3 (Elevating Issue Concerns) and consider the organizational structure of LB&I if they seek to successfully manage U.S. federal tax controversies at the examination level.

The graphic...