Mediation.

• Author: Dougherty, James A.
• Position: Tax disputes

The mission of the Appeals function in the IRS is to resolve tax controversies without litigation, in a manner that is fair and impartial to both the government and the taxpayer. Several programs have been developed to assist in facilitating a timely settlement in Appeals. Appeals has developed alternative dispute resolution (ADR) procedures that assist in resolving tax disputes more productively. An example of such a procedure is mediation.

Mediation is a negotiation between the taxpayer and the Service with assistance by an objective and neutral third party. The mediator has no authority to impose a decision; however, the mediator facilitates communication between the two parties that do have the power to reach a settlement. Mediation is used at the end of the appeals process as a final attempt at resolution before litigation is necessary. The Internal Revenue Service Restructuring and Reform Act of 1998 (IRSRRA '98), as well as the issuance of Announcement 98-99, have increased the interest and awareness in mediation.

Background

The procedures previously used for requesting mediation were outlined in Announcements 95-86 and 97-1. Mediation was only available on Coordinated Examination Program cases generally with disputes of more than $10 million. Therefore, the number of cases using mediation was limited. Only 17 requests for mediation were made, nine of which did not meet the requirements and were thus rejected.

The IRSRRA '98 Changes

The IRSRRA '98 codified the existing mediation procedures but eliminated the dollar threshold, making dispute resolution more readily available. Therefore, the IRS is to issue procedures that expand the availability of mediation. Until these are issued, requests are being accepted on an ad hoc basis. As of late 1998, Appeals was processing five mediation cases filed under the authority of the IRSRRA '98.

Announcement 98-99

In Announcement 98-99, the Service expanded the availability of the mediation dispute resolution technique. Taxpayers already in Appeals may now request mediation for factual issues involving an adjustment of $1 million or more. These procedures are available for requests made during a two-year test period beginning on Nov. 16, 1998. The announcement addresses the fact that the IRSRRA '98 requires taxpayers to have access to mediation below the $1 million threshold. Procedures for this expansion are being developed.

Role oft he mediator. The mediator's main responsibility is to...