LMSB realignment.

• Author: Ely, Mark H.
• Position: IRS Large and Mid-Size Business Division

Editor's note: Mr. Ely is the former chair of the AICPA Relations with the IRS Committee. Messrs. Dougherty and Taylor are members of the IRS Practice and Procedures Committee.

LMSB Realignment

In 2000, as part of its modernization effort, the IRS reorganized the Large and Mid-Size Business Division (LMSB) along industry lines. It intended to improve taxpayer customer service by grouping revenue agents (RAs) by industry "expertise." While the Service's new approach has been partially successful, it needed further modification to achieve its original objectives. Thus, starting in October 2002, the IRS reorganized the LMSB to have a geographic focus, while still maintaining much of the industry alignment.

Industry Focus

Organization along industry lines encourages identification of common issues and helps the IRS develop guidance for use nationwide. Further, it promotes uniformity and consistency in how the Service treats taxpayers within the same industry.

In 2000, the IRS arranged the LMSB into five industries:

* Communications, Technology and Media;

* Financial Services, Professional and Scientific;

* Heavy Manufacturing and Transportation;

* Natural Resources and Construction; and

* Retail, Food, Pharmaceutical and Healthcare.

Industry Directors (ID) lead each industry, supported by Directors of Field Operations, Senior Industry Advisers, Territory Managers, Team Managers and RAs. The RAs were assigned to a particular industry; attempts were made to delegate cases along those lines. Territory and Team managers were also allotted cases based on the same principle.

Obstacles

The industry-alignment approach posed several problems. First, the Territory Manager assigned to a particular examination did not always work in the same city as the Team Manager, who, in turn, might have been in a city other than that of the RA. This was further exacerbated when Field Specialists were involved. As a result, high travel costs and inefficiency were incurred to manage and staff cases in a particular industry. Further, for any given case, Territory Managers had to supervise and coordinate IRS personnel from too many different locations.

Another obstacle was the apparent inability of LMSB teams to work on priority cases in the division as a whole, rather than on an industry-by-industry basis. Ideally, the teams would want to tackle high-risk cases first. However, under the industry approach, low-risk cases had priority, when they were the only ones...