TEI--Large Business & International Division Liaison Meeting Minutes: February 29, 2012.

On February 29, 2012, a delegation from Tax Executives Institute met with Large Business & International (LB&I) Deputy Commissioner (Operations) Paul D. DeNard and LB&I Deputy Commissioner (International) Michael Danilack, III, and other officials of the Internal Revenue Service. The following minutes were prepared by Tax Executives Institute. Although reviewed by the IRS, they have not been formally approved by the agency. The agenda for the meeting was published in the January-February 2012 issue of The Tax Executive as well as on TEI's website.

LB&I Deputy Commissioner (Operations) Paul DeNard welcomed TEI President David M. Penney and the TEI delegation. He said that because of travel commitments, LB&I Commissioner Heather C. Maloy was unable to attend the meeting and sent her regrets. On behalf of TEI, Mr. Penney thanked the IRS for its ongoing commitment to an active dialogue with taxpayers. The IRS and TEI delegations to the meeting are set forth below.

IRS Delegation

Paul D. DeNard

LB&I Deputy Commissioner (Operations)

Michael Danilack, III

LB&I Deputy Commissioner(International)

Cheryl P. Claybough

Director, Pre-Filing and Technical Guidance

Deborah T. Palacheck

Senior Adviser to the LB&I Commissioner

Thomas Brandt

Director, Planning, Analysis, Inventory & Research

Samuel M. Maruca

Director, Transfer Pricing Operations

Linda M. Kroening

Division Counsel

Drita Tonuzi

Deputy Division Counsel

Thomas A. Vidano

Deputy Division Counsel (International)

Candace Hadley

Director, LB&I Communications and Liaison

Margaret von Lienen

Executive Assistant to the LB&I Deputy Commissioner (Operations)

Jane K. Agule

Senior Program Analyst, IRS National Public Liaison

Kathryn L. Gregg

Manager, LB&I Stakeholder Liaison

TEI Delegation

David M. Penney

General Motors of Canada Limited

TEI President

Carita R. Twinem

Spectrum Brands Holdings, Inc.

TEI Senior Vice President

Terilea J. Wielenga

Allergan, Inc.

TEI Secretary

Mark C. Silbiger

The Lubrizol Corporation

TEI Treasurer

Daniel R. Goff

Xilinx, Inc.

TEI Executive Committee

C.N. (Sandy) Macfarlane

Chevron Corporation

TEI Executive Committee

Brian C. Ugai

Starbucks Coffee Company

TEI Executive Committee

Robert L. Howren

BlueLinx Corporation

Chair, TEI Federal Tax Committee

Michael J. Bernard

Microsoft Corporation

Chair, TEI IRS Administrative Affairs Committee

Jocelyn P. Krabbenschmidt, Amazon.com

Chair, TEI International Tax Committee

Donald J. Rath

Synopsys, Inc.

Chair, TEI Financial Reporting Committee

Timothy J. McCormally

TEI Executive Director

Eli J. Dicker

TEI Chief Tax Counsel

Jeffery P. Rasmussen

TEI Senior Tax Counsel

Daniel B. DeJong

TEI Tax Counsel

Benjamin R. Shreck

TEI Tax Counsel

LB&I 2012 Priorities

Mr. DeNard said that the LB&I Division's 2012 priorities are to focus its resources as effectively and efficiently as possible to identify areas of noncompliance, streamline case and issue selection processes, work cases and resolve issues as early as possible, issue guidance where needed, and generally increase certainty and consistency of treatment for all taxpayers. In sum, the items on the Institute's agenda are LB&I's priorities.

Examination-Related Matters

1. IRS Realignment--LB&I International Function

   Mr. Goff invited a discussion about the effect of the reorganization of the International function on the LB&I Division's programs and procedures. Mr. Danilack said that the reorganization is part of the Division's overall strategy of focusing on issues and bringing greater expertise and more resources to bear on the most important issues. International issues have a high priority and there is more work than the Division has resources. Thus, the reorganization is designed to sharpen compliance efforts and align resources strategically. He acknowledged that, as the Division's overall reorganization has unfolded, taxpayers may have perceived two organizations and two types of audits--one for international and one for all other issues. The management structure and reporting lines are now in place on the international side, he said, to ensure that the Division operates as a single, transparent organization with the ability to resolve issues quickly. As a practical matter, as the organization changes, questions will arise about who has what authority, so taxpayers should elevate issues when they have concerns. There should be no question in a taxpayer's mind about who the decision-maker is.

   Mr. Goff asked who the principal decision-maker is on cases. Mr. Danilack said the case manager is the decision-maker for domestic issues; the international examiner or international case manager is for international issues. There are parallel management chains, he said, so differences between the two sides can be resolved by elevating the issues to a common manager. Mr. Penney inquired whether taxpayers have access to the decision-makers in the respective chains of command. Mr. Danilack said that taxpayers should feel free to elevate issues on either side; there are no restrictions impeding taxpayers from meeting anyone in the Division--all the way to and including Commissioner Maloy. Mr. Silbiger observed that some taxpayers are uncomfortable elevating issues above the examining agents or case managers out of concern that they might jeopardize the day-to-day working relationship with the field. Mr. Danilack replied that Ms. Maloy's philosophy is that taxpayers should freely elevate issues; IRS managers should resolve those issues and manage the relationship with the taxpayer.

   Mr. DeNard encouraged taxpayers to use the Quality Examination Process (QEP), which emphasizes communication at all stages and levels of an examination. A management chain is in place on both the international and domestic sides, he added, that taxpayers can freely access when they wish. Mr. Danilack cautioned against the view that one side might "trump" the other since the Division's focus is on getting the correct answer for all issues. Ms. Wielenga asked whether a case manager has authority to decide whether to pursue or drop issues; she observed that case managers seemed to have grown increasingly deferential to agents, especially international agents. Mr. Danilack acknowledged internal LB&I discussions about the Institute's concern and said that the IRS training classes emphasize that the proper approach is for case managers, in appropriate cases, to challenge agents' treatment of taxpayer issues.

   Mr. Macfarlane inquired whether an issue-based organizational structure for LB&I will result in more frequent use of centrally controlled, standardized information document requests (IDRs). In other words, will someone other than the examination team assigned to, and knowledgeable about, the taxpayer's business, records, and practices develop the IDRs? Mr. Danilack said that standardized IDRs represent an attempt at a "program approach" to examinations, but as our exam programs are changed to ensure better issue development of the right issues, and a "letting go" of other issues, the standardized IDRs that are out there will need to be reevaluated. Mr. Macfarlane suggested that a boilerplate approach for IDRs can result in the issuance of multipart questions that are, at once, confusing and time consuming since they are not tailored to the taxpayer's organization. For example, his company recently received a 47-question IDR, with many enumerated questions having multiple parts. Mr. Danilack acknowledged that taxpayers and agents should have mutually agreed expectations about the scope and purpose of IDRs and that IDRs have to make sense. Achieving...