TEI Region VII -- Internal Revenue Service Southeast Regional District Liaison Meeting.

On December 14, 1999, representatives of Tax Executives Institute participated in a liaison meeting with representatives of the IRS's Southeast Region.

1. IRS Modernization. TEI members remain very interested in and concerned about the IRS's ongoing modernization. During the liaison meeting, we request a status report on the IRS reorganization, particularly in respect of the following issues:

   1. Will CEP taxpayers see any immediate changes in the conduct of their audits? What will be the consequences of transitioning from the current geographically based organization to an organization based on industry lines? Will the IRS have the resources it needs to audit efficiently?

      The objective of the reorganization is to provide better service to the IRS's customers by providing a more focused and service-oriented structure to support the field operations in providing customer service. By providing an industry-based organizational structure, the IRS will be better able to respond to the specific and often unique situations that arise in many industries. In addition to better training and awareness of industry-specific concerns, the nationwide responsibility by industry should promote more consistency and experience in handling cases.

      Coordinated Examination Program (CEP) taxpayers will be the customers of the Large and Mid-Size Business (LMSB) Operating Division. The headquarters of this division will be located in the Mint Building in Washington, D.C. LMSB is scheduled to stand-up as a headquarters operation in the spring of 2000. As with the rest of the IRS, the affected components of this division are mainly at the mid, top, and executive levels of the organization. Initially, team members, Team Coordinators, and Case Managers will be unaffected by changes in the upper level structure. Changes to the audit process will also be minimal since current audit teams groups will continue operating after the reorganization. The major management differences will be at the Territory level, which may be located at a different geographical location from the current Branch Chief's office.

      IRS resources have not been reduced by the reorganization and currently no major hiring initiatives are foreseen. Improvement of the efficiency of the audit process, however, continues to be a primary goal of the IRS.

   2. Will the new organization cause any change in the "one-stop shopping" concept?

      The IRS is committed to providing accurate and prompt service to each taxpayer. The new structure should work to further enhance the one-stop shopping goal because employees will be focused on taxpayers in particular industry groupings for which they will be trained and eventually experienced. LMSB's goals include resolving the taxpayer's issues at the earliest possible point.

   3. How does the IRS see the reorganization affecting the way TEI and other groups interact with the agency? With regions and districts gone, what will be the best way for TEI to resolve local problems not requiring national attention?

      Liaison with TEI and other groups will remain an integral part of the IRS's ability to ensure that taxpayers receive the service they should and the input of the member organizations can be quickly received and discussed. The Office of Communications and Liaison will have field office functions to coordinate the various liaison activities.

      At the local level, there will still be the Case Manager or Large Business Entity (LBE) Manager, as well as Territory Manager, where most case-related problems can be handled. The Territory Manager will be equivalent to a combination of the current branch chief and division chief positions. Above that will be the Directors' Field Operations and then the Industry Directors. The chain of command will be more centralized, affording the opportunity for more direct dealings with our outside constituency.

   4. TEI understands that one emphasis of the Large and Mid-Size Business Operating Division will be on creating a "pre-filing agreement" program to resolve issues before returns are filed. Can you provide any details on this initiative? Will the division have jurisdiction or will it rest with Counsel?

      Greater emphasis will be placed on pre-filing and pre-audit initiatives, which are now being considered. The current proposal is for the Pre-Filing & Technical Guidance function to report directly to the Commissioner and Deputy Commissioner, LMSB. The function is proposed to "stand alone" to allow future growth to support the pre-filing vision. At this stage, no final decisions have been made regarding specific initiatives.

   5. What do you see as the most significant changes in tax administration over the next five years?

      The current reorganization of the IRS should produce many positive changes over the next few years. In utilizing the new Balanced Measures System to determine organizational success, we believe that tax administration will become more of a partnership with the taxpaying public. The most visible, significant effect will be in the area of increased customer service.

   6. What can TEI and its members do to help the IRS during and after the transition?

      Recent efforts by TEI have been beneficial in assisting the overall reorganization process. The letter to the National Director, Corporate Examinations, discussing balanced measures provided necessary public insight to the process. The IRS/TEI Customer Satisfaction Task Force produced specific recommendations regarding specialist and specialist managers' involvement in the CEP process to improve customer satisfaction. It is our desire that these types of mutual projects continue, both in the near-term and after the reorganization is completed.

   7. With the new industry-based organization, will there be any changes in how the IRS coordinates its litigating positions ?

      All Counsel resources will continue to report to the Chief Counsel. To enhance our ability to work in active partnership with the new IRS, we have created four new executive positions -- Operating Division Counsel -- one for each Operating Division Commissioner. These new executives will be located with their respective Operating Division Commissioner and serve as their principal point of contact, working closely with them on strategy and planning.

      Most of Counsel's current field attorneys will be aligned with and report to one of the Operating Division Counsel. This alignment will increase the level of expertise and service available for the specialized needs of the Operating Divisions.

   8. How will IRS executives and high-level Examination managers in the Southeast Region be affected by the structural changes?

      The regional structure will no longer exist when the reorganization is completed. The new LMSB organization will be aligned into five major industry segments with no geographic boundaries, each headed by an Industry Director. Assisting the Industry Directors will be Field Operations Directors and Territory Managers. The District structure will also no longer exist, and Territory Managers will replace the current Branch/Division Chief Managers.

2. Interest Netting. On November 10, 1999, the IRS issued guidance on how taxpayers can secure retrospective relief in respect of the interest-netting provisions of the IRS Restructuring and Reform Act of 1998. When will the IRS have a system in place that will automatically apply interest netting (i.e., in respect of periods after June 1998)?

   Because of current systemic limitations, an automated system will not be in place in the near future. Because netting can involve different classes of tax returns and different years of closed adjustments, this is a manual process. The IRS is, however, developing procedures and instructions to identify netting situations, as well as language for our notices to help taxpayers work with us to identify the applicability of the netting provisions.

3. Interest Calculations. Even before enactment of the interest-netting provisions, taxpayers have found it necessary to engage outside consultants to review IRS interest calculations. One reason for this is the difficulty...