TEI Holds 2020 Liaison Meetings With the Internal Revenue Service and U.S. Department of the Treasury.

On February 27-28,2020, a delegation of Executive Committee members, standing committee leaders, and Institute staff assembled in Washington, D.C., for TEI's annual liaison meetings with the Internal Revenue Service and U.S. Department of the Treasury. The delegation was led by Katrina H. Welch, TEI international president, under the stewardship of Watson M. McLeish and Benjamin R. Shreck, tax counsels for the Institute. TEI's substantive meeting agendas are reprinted below.


  1. Welcome and Introductions

  2. Agency-wide Priorities

    We invite Deputy Commissioner Lough to share her observations on the current state of affairs at the IRS. What immediate challenges do you see for the agency in 2020 as it moves past the initiation of filing season, and what are the agency's short- and long-term priorities for the future?

    We invite discussion of efforts being undertaken to balance the Commissioners agenda of increased enforcement with Congress's mandates, through enactment of the Taxpayer First Act (Public Law 116-25), to expand and strengthen taxpayer rights and organizationally reform the IRS into a more taxpayer friendly agency. In particular, we would like to learn more about the Commissioner's ideas on how the agency should be reorganized and how TEI might best inform his deliberations through constructive engagement. TEI was actively engaged in the legislative and implementation processes of the Internal Revenue Service Restructuring and Reform Act of 1998 (Public Law 105-206), and we stand ready to contribute to this new effort.

  3. LB&I

    1. Key Challenges, Priorities, and New Initiatives

      We invite LB8cI leadership to comment on key challenges the division faces in 2020, as well as its priorities and new initiatives planned for the year. What impact, if any, do you foresee the Taxpayer First Act having on LB&I and its interactions with large business taxpayers?

      Human Capital Management. We read with interest the LB&I staffing changes reported in the FY2020 LB&I Focus Guide. We invite discussion of the overall decline in LB&I's leadership team and how it will impact the division's operations during the fiscal year. The number of tax law specialists increased by almost 400% (from 24 to 91). We invite discussion of why this area of LB&I's staffing increased so dramatically. We would also appreciate a report on hiring expectations for 2020, including specific areas where LB&I believes it is particularly understaffed.

      Technology. In April 2019, the IRS released a modernization plan to improve information technology ("IT") systems. In its December progress report provided in Publication 5382, the IRS promotes its drive to modernize its IT systems, make online accounts more accessible to taxpayers, and simplify identity verification for data security and identity theft protection. The report asserts:

      Modernization will enable us to accomplish a lot more, in less time. Depending on budget considerations, as technology evolves, we will continue to modernize our systems to improve the internal and external services provided. We are continuing to deliver capabilities that put taxpayers first and enhance every perspective of the taxpayer experience. IRS Pub. 5382 at 41. We welcome discussion of how LB&I will benefit from this modernization effort and how LB&I expects new technology to impact large business taxpayers in the near and long terms.

      Taxpayer Service. Historically, large business taxpayers in the CIC program have relied on Exam team members assigned to their case to assist them obtain status reports on and other assistance with agreed items being processed at IRS Service Centers and similar processing units. Under LB&I's new issue-focused examination approach, some of these taxpayers no longer have Exam teams assigned to their case. We invite discussion of LB&I's plans to provide account support services to such taxpayers.

    2. LB&I Examinations

      LB&I Examination Process (LEP) Progress Update. Several years ago, LB&I shifted its organizational structure and began implementing an approach focused on centrally identified tax compliance risk. The division identified four core principles that would guide its operations going forward:

      * A flexible, well-trained workforce;

      * Better work selection;

      * Tailored treatment streams; and

      * An integrated feedback loop.

      We invite LB&I leadership to comment on these four principles in terms of progress achieved to date, challenges that remain, and plans for areas that need improvement.

      Identifying returns for examination. In May 2019, LB&I rolled out a new administrative process for the selection of large corporate tax returns for examination. The process, known as the Large Corporate Compliance program or LCC, replaces the Coordinated Industry Case (CIC) program and applies beginning with returns filed for the 2017 tax year. We understand the process first uses automated pointing criteria to identify returns to be included in the LCC audit selection process. LCC returns are then classified into categories of risk based on data analytics, and LB&I determines compliance treatment streams to be applied to LCC returns based upon the return's overall category of risk and available resources. According to the IRS's May 16, 2019 News Release (IR-2019-95):

      LCC works in tandem with LB&I agents and examiners who apply their experience and expertise in undertaking compliance actions and determining compliance treatment streams of the biggest and most-complex corporate taxpayers. Each enhances the other. The program includes continuous improvement using an agile model principle to continually monitor and improve based on feedback from stakeholders including field teams, practice networks, and data scientists. We invite discussion of practical differences large business taxpayers should expect to see beginning with the examinations of their 2017 tax years. Will revenue agents still have the same level of autonomy for selecting issues to examine?

      Identifying more productive, current work. In recent remarks, Commissioner Rettig stated, "I don't want us to be doing examinations that we should not be doing, I don't want us to have cases in appeals that shouldn't be in appeals, I don't want us to litigate cases that shouldn't be litigated." 165 Tax Notes Federal 1043 (Nov. 11, 2019) (reporting on the 35th annual High Tech Tax Institute in Palo Alto, California, sponsored by the Tax Executives Institute and San Jose State University). TEI members agree with the Commissioner's comments and believe issue selection practices of revenue agents is a critical aspect of overall exam efficiency. We invite discussion of efforts, other than campaigns, LB&I leadership is undertaking to ensure its agents are selecting productive issues to examine.

      Materiality is a concept that revenue agents and taxpayers often interpret differently. We invite discussion of LB&I leadership's efforts to ensure revenue agents select material issues for examination and avoid adjustments that require significant time to develop yet result in immaterial adjustments.

      It is not uncommon for revenue agents to raise and re-examine issues that have been decided adversely to Exam in prior examination cycles, either through an Appeals proceeding or after review by IRS Counsel or National Office specialists. This is true even in cases where there have been no changes in facts, administrative rulings, or case law. We invite discussion of guidance revenue agents receive on determining whether to re-examine issues resolved in favor of the taxpayer in prior audit cycles. We believe significant time and resources could be saved by instructing revenue agents when it is appropriate to raise or not to raise such issues.

      Adherence to LB&l's policies and procedures. With a workforce of over 4,500, we appreciate the difficulties LB&I leadership may have ensuring its staff adhere to the division's policies and procedures. The...

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