An inside look at the arbitration and mediation programs.

• Author: Ely, Mark H.
• Position: IRS Appeals Division

The mission of IRS Appeals is to resolve tax controversies without litigation, in a manner both fair and impartial to the government and the taxpayer, and in a manner that will enhance voluntary compliance and public confidence in the Service's integrity and efficiency. Appeals has developed two programs to help achieve this mission--nondocketed arbitration and post-appeals mediation. These are alternatives to normal settlement negotiations between Appeals and a taxpayer, when a settlement cannot be reached. Both programs employ a neutral third party to assist the parties in resolving outstanding issues. The main difference between the programs is that the findings in arbitration are binding, while the findings in mediation are not.

Arbitration

Program description. Nondocketed arbitration is an optional process that uses an arbitrator to render a decision binding on both parties. Sec. 7123(b) (2) established the pilot program for arbitration, and Ann. 2000-4 described it. Issues eligible for arbitration are those not resolved under normal Appeals procedures. Arbitration may be used only to resolve factual issues that can be severed from the other issues in a case. A factual issue is one that can be resolved solely on a finding of fact. Any interpretation of law, regulation, ruling or other legal authority must be resolved and agreed on by the parties, for the issue to be eligible for arbitration.

According to Ann. 2000-4, arbitration may not be used for:

* Cases in which arbitration is inappropriate under either 5 USC Section 572, General Authority, or 5 USC Section 575, Authorization of Arbitration;

* Issues involving the substantiation of expenses under Sec. 162 or 274;

* An issue designated for litigation or docketed in any court;

* An Industry Specialization Program (ISP) issue or an Appeals Coordinated Issue (ACI); or

* An issue for which the taxpayer has filed (or intends to file) a request for competent authority assistance.

Appeals' arbitration program is a nondocketed procedure, not meant to become a legal process. If a taxpayer wants a legal process, the courts or docketed arbitration are available, both handled by the IRS Chief Counsel's Office.

Requesting arbitration. Either the taxpayer or Appeals may request arbitration, but both parties must agree to arbitrate for the case to be accepted in the program. Taxpayers should send their request to the Team Case Leader/Appeals Officer responsible for the case. The Team Case Leader/ Appeals Officer will prepare a written recommendation for action on the request and forward the request and...