Large and mid-size business division fast track dispute resolution pilot program.

• Author: Dougherty, James A.

As part of the Internal Revenue Service's continuing commitment to reduce the burden on taxpayers, its Large and Mid-Size Business Division recently announced a Fast Track Dispute Resolution Pilot Program (IRS Notice 2001-67). The program creates a new opportunity for corporate taxpayers to utilize Appeals tools to resolve outstanding issues while their cases are still in the Compliance jurisdiction. There are several benefits to this program, including reducing time and cost to resolve issues, bringing dispute resolution to the lowest level, and fostering cooperative relationships between taxpayers and the IRS.

The pilot is a joint effort between LMSB and the Office of Appeals. The program is open to corporate taxpayers in the LMSB Division -- that is, those taxpayers with greater than $10 million in assets. The taxpayers must also have at least one open year under examination and at least one disputed issue. We recently spoke with J. W. Wyatt, Appeals Fast Track Acting Program Manager, who shared much insight into the program.

If taxpayers choose to enter the program, they have two options, settlement and mediation.

Fast Track Mediation

Under Fast Track Mediation (FTM), an Appeals Officer or an Appeals Team Case Leader will act in the role of mediator to help the parties resolve factual issues. Under FTM, there is no hazards settlement option. In other words, the taxpayer and the IRS cannot reach a settlement based upon the hazards of litigation, as they would if the case were actually in Appeals jurisdiction. Under this option, the parties look at factual issues and reach a voluntary, uncoerced agreement. The objective is to facilitate communication and negotiation in order to reach resolution of the issues between the parties.

Fast Track Settlement

Under this option, Appeals may use its settlement authority to achieve a mutually acceptable agreement. This option utilizes an Appeals Team Case Leader to facilitate the communications to resolve both legal and factual issues. In Fast Track Settlement, Appeals may consider the hazards of litigation when resolving disputes.

Benefits

There are several key features to the Fast Track Dispute Resolution (FTDR) program, including no accrual of "hot interest". Hot interest is the additional two percent interest that corporations are required to pay on deficiencies of more than $100,000 when an issue goes to Appeals. Generally, hot interest begins to accrue 30 days after the 30-day letter is issued by Compliance. By utilizing FTDR, taxpayers are able to enjoy the benefit of having Appeals tools and settlement techniques available to them while they are still in Compliance's jurisdiction. And since they are still in Compliance's jurisdiction, hot interest will not begin accruing.

Another feature of the program is that the process is relatively fast, with the goal being to resolve issues under the fast track program within 120 days. The cases that have been settled thus far in the pilot are averaging only 60 days to resolve. This is a significant time savings over the two years (or more) it generally takes for the normal procedure where the audit and appeal occur sequentially. In the traditional process, at the end of the examination, it generally takes a taxpayer up to 60 days to prepare the protest letter in response to the 30-day letter issued by exam. After the protest is submitted, it takes between 30 and 45 days for the rebuttal to be prepared by exam. Once...