Tax Executives Institute--Internal Revenue Service Large and Mid-Size Business Division liaison meeting; February 5, 2002.

On February 5, 2002, Tax Executives Institute met with Larry R. Langdon, Commissioner of the IRS's Large and Mid-Size Business Division, and other representatives of LMSB. TEI President Robert L. Ashby led the Institute's delegation to the meeting. The agenda for the meeting is reprinted below. Minutes of the meeting will be published in a future issue of the magazine.

1. Introduction

2. LMSB Updates

   1. Industry Issue Resolution Program

      * TEI commends the IRS for developing new techniques to provide taxpayers and IRS personnel with more timely, focused guidance. We are concerned, however, that the IIR process not place audits on "hold" while issues are being developed and that the process not replace the issuance of more generic guidance.

      * We invite LMSB to provide an update on the IIR program, including whether additional issues (particularly in the international area) have been selected for resolution.

   2. Post-Filing Design Team

      * In November, TEI representatives met the IRS Post-Filing Design Team to explore ways in which the post-filing process can be improved. The first phase of the project was completed in December 2001.

      * TEI's recommendations for improving the process include: (i) focusing on specific material issues (perhaps through better use of the Schedule M), rather than auditing the entire return; (ii) not revisiting issues that were audited with little or no change during the prior audit cycle; (iii) increasing the use of statistical sampling techniques; and (iv) increasing the use of electronic communication.

      * We invite LMSB to provide an update of the project.

   3. Fast-Track Appeals Process

      * LMSB has issued Notice 2001-67, which LMSB Commissioner Larry Langdon has described as a "field-based" way to resolve conflicts arising from audits. Under the procedure, taxpayers and IRS examiners work with an Appeals team to resolve their differences within 120 days. The procedure requires taxpayers to waive their ex parte protections. Once resolved, the resulting agreements could be applied to subsequent and prior periods. Some issues have been resolved within a week.

      * We invite LMSB to provide a status report on the project.

   4. Pre-Filing Agreement Program

      * TEI has been a supporter of the pre-filing agreement initiative from the outset. In Rev. Proc. 2001-22, the IRS made the PFA initiative permanent and expanded it to international issues.

      * In a report last summer, the Treasury Inspector General for Tax Administration found that the pilot program offered taxpayers a successful process by which to resolve specific issues on tax returns not yet filed. The TIGTA also found, however, that significant challenges remained before the pilot program can be converted into an effective operational program.

      * We invite LMSB to provide a status report on the PFA program, including its relationship to the IIR program.

   5. Role of Counsel

      * During last year's liaison meeting, LMSB Division Counsel Linda Burke discussed the development of "rules of engagement" for Division Counsel. We invite the IRS to provide a status report on the rules and their implementation.

      * We also invite a discussion of the need for training of Counsel personnel.

3. TEI Updates

   1. TEI Testimony Before IRS Oversight Board

      * TEI President Robert L. Ashby testified before the IRS Oversight Board on January 29, 2002. Mr. Ashby was on a panel devoted to reducing taxpayer burden. The Institute's testimony addressed the need for currency in audits, the use of statistical sampling, the need for record retention agreements, the increased use of electronic technology, the need for prompt and effective guidance, the need for adequate funding of the IRS, and the need to simplify the tax law.

   2. TEI-LMSB Liaison Relationship

   9. Effectiveness of Liaison Relationship. TEI and the IRS have established points of contact to facilitate liaison between the two organizations. Most recently, it was suggested that the Senior Industry Advisers should be added as contacts for the various industry groups, in addition to the Industry Directors.

      ii. Industry Meetings. During the past year, TEI chapters have sponsored forums in New York, Detroit, and Cincinnati on specific industry issues (respective financial services, heavy manufacturing, and retail). Are future meetings in the works?

      iii. Use of CEOs in IRS Training Program. Senior Industry Adviser Robert Adams of the Heavy Manufacturing and Transportation Industry Group has requested TEI's help in identifying CEOs or CFOs who would be willing to participate in IRS training programs to discuss how business operates.

4. Technical Issues for Discussion

   1. Tax Shelter Disclosure Initiative

      In Announcement 2002-2, the IRS announced a disclosure initiative to encourage taxpayers to disclose the tax treatment of tax shelters and other items to which the section 6662 accuracy-related penalty may apply. Disclosures must be made before the issue is raised on audit or April 23, 2002, whichever is earlier.

      The...