Tax Executives Institute-Internal Revenue Service Liaison Meeting Minutes.

February 23, 2000

On February 23, 2000, a delegation from Tax Executives Institute met with Commissioner of Internal Revenue Charles O. Rossotti and other representatives of the Internal Revenue Service.

On behalf of the Internal Revenue Service, Commissioner Charles O. Rossotti welcomed TEI President Charles W. Shewbridge, III, and the other members of the delegation from Tax Executives Institute to the liaison meeting. The IRS's and TEI's delegations to the liaison meeting are set forth below.

Opening Comments

On behalf of the Institute, Mr. Shewbridge thanked the Commissioner and other IRS officials for meeting with the Institute. He expressed the view that the liaison meetings are mutually beneficial since they afford the IRS and TEI an opportunity to work together to make the tax system more administrable. He pledged the Institute's continuing support for the IRS's modernization effort, including the budget the IRS needs to recruit and retain a well-trained and qualified workforce. He also thanked the Office of Public Liaison for its assistance in preparing for the meeting.

Commissioner Rossotti expressed his appreciation for the various forms of support that TEI has demonstrated for the IRS during the past year, including the Institute's support for the IRS's fiscal 2000 budget request, the active participation of TEI members in various IRS projects and initiatives relating the reorganization, and cosponsoring the Modernization Conference in January. He said that the meeting agenda reflected many of the issues and processes that the IRS wants to address, including prefiling agreements and the sensitive but important issue of tax shelters. He referred to TEI's mission statement supporting a tax system based on voluntary compliance. He said that the IRS is developing various methods to address corporate tax shelters and other compliance issues without impeding legitimate tax planning or unduly burdening compliant taxpayers. The IRS, he said, must continue to meet its traditional enforcement function and the new division structure aligned by customer types will permit the IRS to focus its efforts more efficiently. He added that this liaison meeting likely marks an important milestone in the reorganization effort since much of the meeting will be handled by Larry R. Langdon and Debbie Nolan in their new roles as Commissioner and Deputy Commissioner, respectively, of the Large and Mid-Size Business (LMSB) Division.

Mr. Wenzel noted that LMSB division is coming together very quickly with the management team of 30 executives now set. The Modernization Conference, he said, was the "end of the beginning" of the reorganization with Phase II.B. design phase completed and the Phase III implementation process well underway. He said that the IRS will attain its goal of having all four business divisions "stand up" as functional operating units by October 1. He added that the support service functions, such as information services and human resources, are also moving forward. The Appeals Division, he said, has installed its management team and the Taxpayer Advocate Service is operating on a national scale. He said that rank-and-file IRS employees are eager to participate, with many expressing enthusiasm for implementing the restructured organization as quickly as possible.

Mr. Langdon concurred with the opening remarks of the Commissioner and Mr. Wenzel, noting that TEI has been an integral participant in the reorganization process. He thanked the group for the input TEI provided to the IRS design teams and citing its work with the Customer Satisfaction Task Force on Specialists as especially important. Mr. Langdon said that, while much work remains to fully implement the reorganization, IRS personnel are "catching the fever" to effect the vision of the restructured agency.

IRS Modernization

1. Transition Issues and Liaison Activities. Mr. Langdon reported that the LMSB Division is on track to "stand up" as a separate operating division on June 4. The national office management team of 30 executives has been established, he added, and the group is recruiting the next layer of territory managers, senior technical advisers, and other personnel. He reported that Ms. Nolan and he have scheduled a series of meetings across the country in April and May to brief IRS employees on the structure, operation, and management of the new division. IRS employees, he explained, are eager to understand their roles in the restructured organization, who their bosses will be, and the effect of both on their careers. The LMSB management team, he said, faces a major challenge to ensure that its employees are in sync with the goals of the restructured organization and the tax system generally.

   TEI, Mr. Langdon continued, can play a major role in facilitating the education of taxpayers about the modernization by assisting the IRS in conducting a series of town-hall meetings in various cities across the country. The purpose of the meetings is to provide TEI members and local practitioners with a fuller understanding of the structure, management, processes, and personnel in the restructured IRS. He explained that the LMSB management team is creating an entirely new environment that will support decision making at both the lowest level of the IRS and at the earliest time possible. To ensure consistent treatment of taxpayers, he said, the IRS is establishing a management structure to facilitate the early identification of significant policy issues that should be analyzed and decided at the national level. The issues will be pushed back to the field for resolution of cases. The streamlined structure should expedite the process substantially. Mr. Langdon next expressed his appreciation to TEI for accommodating his request to involve the LMSB industry directors in TEI's upcoming Midyear Conference. Mr. Langdon said that LMSB and TEI are partners in making the system work and expressed a desire to maintain an open and continuing dialogue on both a formal and informal basis. In that regard, he noted that Bob Brazzil, Industry Director for Retailers, Food & Pharmaceuticals, has been working with Mr. Murphy and members of the Institute in planning the town-hall meetings.

   Mr. Murphy confirmed TEI's willingness to assist the IRS in setting up external town-hall meetings, noting that several members have already stepped forward to work with Mr. Brazzil on the scheduled meetings. He added that, following Mr. Langdon's luncheon address at TEI's Midyear Conference, TEI staff and members of the IRS Administrative Affairs Committee will escort the IRS Industry Directors to the 22 TEI industry sessions and introduce the directors to TEI members. He added that, with the IRS's new industry orientation, the Institute's leadership has been discussing various options to facilitate both informal and formal liaison activities at the national, regional, and local chapter levels.

2. Appeals. Mr. Black provided a brief overview of the reorganization of the Appeals Division. He said that the IRS is anticipating that few appeals will arise in the Tax Exempt/ Government Entities Division. Hence, he said, Appeals for that group will be combined with the Small Business/Self-Employed Division so there will be three, rather than four, Appeals divisions. He reported that the Appeals Division has selected its three top executives, including the Deputy National Chief, Linda Garrard; Deputy Chief for Small Business/Self Employed and Tax Exempt/ Government Entities, John Piper; and the Deputy Chief for LMSB, Earl Blanche, Jr. Mr. Black said the Appeals Division anticipates standing up in July of this year.

   Mr. Black reported that he and other Appeals representatives met during the previous week with members of TEI's IRS Administrative Affairs Committee in Orlando, and the two groups discussed a number of issues, including Appeals staffing, mediation and arbitration, and ex parte communications. He expressed his appreciation for TEI's comments and feedback and said that Appeals is committed to settling cases and issues on a timely basis. In view of the Institute's comments, he said, the division will review its projected workload and staffing needs.

   Mr. Black next noted that the Appeals Division received input from TEI, the Big 5 accounting firms, state accounting societies, and other taxpayer and practitioner groups concerning Notice 99-50, which sets forth a proposed revenue procedure governing ex parte communications between Appeals and other IRS personnel. He said that many groups had recommended that the IRS discard its first effort and start over. TEI's comments, he said, were more focused and thoughtful, providing constructive recommendations about the proper interaction among Appeals, Counsel, industry specialists, examining agents, and taxpayers. As an example of a constructive suggestion, he cited TEI's recommendation to invite the taxpayer to any post-settlement conference to address the treatment of recurring and rollover issues. He said TEI's proposal is consistent with other IRS initiatives to expedite case and issue resolution and would be considered along with other recommendations. The IRS's objective, he said, is to issue a revenue procedure that will be consistent with congressional intent that the Appeals Division maintain its independence and, as important, maintain the appearance of independence.

   In response to a TEI request, Mr. Black reported that there had been 49 requests to use mediation in Appeals and that the IRS had employed 21 different arbitrators. Approximately $2.7 billion in proposed adjustments, he said, have been settled using mediation. He noted that Appeals has established a pilot project to determine how best to use binding arbitration procedures to resolve factual issues. He said that procedure governing arbitration procedures was announced in December and that a hearing will be held on April 5.

   Mr. Rossi referred to a December...