Evaluation of the coordinated examination program and IRS field personnel.

• Position: Tax Executives Institute's comments of June 5, 1997

On June 5, 1997, Tax Executives Institute submitted the following comments on the appropriate standards for evaluation IRS agents and districts to Michael P. Dolan, acting Commissioner of Internal Revenue. The comments were prepared under the aegis of TEI's IRS Administrative Affairs Committee, whose chair is Robert L. Ashby of Northern Telecom Inc. John A. Gurovich of US West Inc., a member of the committee, materially participated in the preparation of the Institute's comments, as did Stephen W. Boocock of Allegheny Teledyne, Inc., Ralph J. Coselli of Shell Oil Company, and Robert J. McDonough of Wang Laboratories, Inc.

During TEI's November 1996 liaison meeting with Commissioner Richardson, yourself, and other IRS National Office personnel, the Institute expressed concern that the National Office's concentration on increased production (as measured by "dollars recommended") could impair the overall effectiveness of the Coordinated Examination Program (CEP) by encouraging agents to pursue questionable issues. Thomas W. Wilson, Jr., National Director of Corporate Examinations, and other IRS representatives explained that increased production is only one factor in the evaluation process. Other factors examined include agreed dollars per staff year, currency, and total adjusted revenues (including claims). Mr. Wilson explained that the measurement of individual performance is separate from the IRS's program evaluation. He concluded by inviting the Institute to submit its views on how best to measure agent performance.

On May 19, 1997, TEI met with Mr. Wilson to discuss the Institute's concerns about the emphasis on increased production (as well as other issues). The Institute has also discussed this issue with the National Commission on Restructuring the Internal Revenue Service. We believe it is now appropriate to reiterate our concerns to you.

Evaluation of CEP Program

The adoption of meaningful measures of performance is essential to the long-term success of the IRS's Coordinated Examination Program. Since our November liaison meeting, the IRS has issued its Examination Program Letter for Fiscal Year 1997. That document, issued by the Assistant Commissioner (Examination), sets forth (at page 5) the following guideline for measuring the IRS District Office in respect of its participation in the CEP program:

Quality examinations will be

conducted with the most effective

and efficient use of

resources. This will be

achieved by involving the

taxpayer in the entire planning

process; incorporating

the CEP auditing standards

in every examination; maximizing

the use of specialists

and specialist managers; and

dealing effectively with taxpayer

procrastination using

upper level management and

the available enforcement

techniques including summonses

where appropriate.

Districts are also advised (again at page 5) to:

Strive to develop and resolve

quality issues at the lowest

level. Emphasize the use of

Alternative Dispute Resolution

techniques including:

Delegation Orders 236 and

247; Accelerated Issue Resolution;

Early Referral; and

Pre-filing Determination.

Practice Risk Analysis on every

examination and involve

the entire examination team

in this practice.

Although we may quarrel with the use of the term "taxpayer procrastination" ("delay" is a less judgmental term) and the use of summonses except in the most serious of cases, TEI wholeheartedly agrees that these standards are a good starting point for evaluation of a District's accomplishments in the CEP program. We have long endorsed the involvement of taxpayers in the planning process and the use of ADR initiatives such as the AIR and early referral revenue procedures. We are pleased that the IRS emphasizes the use of these techniques as an important part of a District's performance evaluation.

We are less sanguine...