TEI-IRS Southeast region liaison meeting: December 17, 1996.

• Position: Tax Executives Institute

December 17, 1996

On December 17, 1996, representatives of TEI's Region V met with officials from the Internal Revenue Service's Southeast Region. TEI's delegation to the annual liaison meeting was chaired by Preston B. Barnett of Cox Enterprises, Inc. the Institute's regional vice president and a member of the Atlanta Chapter, and included the following individuals: T. Norman Bush of James Ricer Corporation (Virginia Chapter), Janet C. Ingle of Ingram Industries, Inc. (Nashville Chapter), Stuart A. Karpel of Turner Broadcasting System, Inc. (Atlanta Chapter), Thomas J. Miller of Providian Corporation (Louisville Chapter), Robert H. Proehl of BellSouth Corporation (Atlanta Chapter), Charles W. Shewbridge, III of BellSouth Corporation (Atlanta Chapter and Institute Treasurer), and Timothy J. McCormally (TEI's General Counsel and Director of Tax Affairs). The Internal Revenue Service was represented at the meeting by Robert Johnson, Regional Commissioner; Daniel L. Black, Regional Director of Appeals; and William C. Roth, Regional CEP Manager.

Reprinted below are the questions that TEI submitted to the IRS in advance of the meeting and the IRS's written responses, which were generally discussed at the meeting. In addition to the topics addressed in the written questions, several other issues were addressed, including: (i) the recent decision to centralize management of the IRS's Appeals function, having the Regional Directors of Appeals report to the National Director of Appeals (rather than the Regional Commissioners); (ii) effective use of the Case Manager as a resource in resolving Service Center problems; (iii) ensuring that members of the examination team have sufficient training and management skills; and (iv) Case Manager oversight of Specialists.

1. Please summarize your recent initiatives to reduce taxpayer burden and what plans you have to achieve further improvements in this area.

   1. The following initiatives to resolve issues at the lowest level are being emphasized:

1. Accelerated Issue Resolution (AIR) -- Is a process to advance the resolution of issues from the current examination to any and all filed returns. It involves filed returns and covers only completed transactions.

2. Delegation Order 236 -- is a form of settlement authority that permits the large case manager to settle an issue based on a prior-year appeals settlement.

3. Delegation Order 247 -- Delegates to case manager authority to accept settlement offers, with respect to coordinated issues within the Industry Specialization Program (ISP) and International Field Assistance Specialization Program (IFASP) on which appeals has coordinated issue papers containing settlement guidelines or positions.

4. Advance Pricing Agreement (APA) -- is an agreement between the taxpayer and the IRS regarding the taxpayers pricing policy. This agreed-upon pricing policy would apply to one or more taxable years in the future and can be rolled back to the filed years.

5. Early Referral to Appeals -- Allows the transfer of fully developed unagreed issues on an in-process examination to Appeals while the case remains in Examination for the simultaneous development of other issues.

6. Involving the Taxpayer in the Planning Process -- Is a concept whereby the CEP examination planning process should be conducted to include appropriate taxpayer and IRS personnel; promote the mutual understanding of the taxpayer's systems and IRS's processes; best utilize each parties resources; and generate quality examinations.

   2. Other initiatives to reduce taxpayer burden include:

1. Service Centers have had the capability to identify and flag notices to CEP taxpayers. This gives Service Center personnel an opportunity to review all notices prior to mailing and to review offsets prior to transfers being made. Service Center personnel also have the capability to exclude large corporations from the BMF offset program for one full year. This enhancement will address those accounts containing complex processing which require multiple adjustment actions outside the scope of normal processing.

2. Each of the Centers appoints a contact person for most CEP taxpayers. While this process has been in place for a number of years, we now have the capability of locally updating the representatives of large corporate taxpayers. Another enhancement made is the process of sending a notice to the taxpayer prior to offsetting taxes due from filing an original return or from subsequent assessments. This process gives the compliant taxpayer an opportunity to respond to balance due notices without an immediate offset of account overpayments.

3. We currently are in the process of upgrading our CEP equipment and software. As will be discussed in more detail in Question 3, our efforts to become more automated will reduce the audit span while improving the quality of the typical CEP examination.

4. The Southeast Region conducted a study of CEP cases with less than 20 points. Recommendations from this study include the following items:

   * Time taken to produce the audit plan should be significantly reduced on the smaller point cases. Part 1 of the CEP plan can be substituted with pre-examination minutes or other appropriate files. Part 2 (Service Management Information Section) can be eliminated.

   * Make time tracking optional on smaller point cases.

   * Consider combining post-examination critique from the past cycle with the opening conference of the current cycle.

   * Requires documented risk analysis and priority/assignment of SAIN areas at the beginning of the examination.

   3. Recommendations from a task force on involving the taxpayer in the planning process will be implemented. These recommendations include:

1. Emphasize the importance of securing an orientation of the taxpayers accounting systems and internal controls.

2. Case managers should coordinate with taxpayers to hold meetings where IRS specialists and their managers can interact with their taxpayer counterparts

3. The IRS team should discuss and work with the taxpayer regarding Notification of Issue Closure.

4. Taxpayers' concerns regarding entities and areas to be examined should be solicited by IRS teams and reviewed with the taxpayer.

5. A copy of the CEP Examination Plan should be given to the taxpayer.

2. In the recent IRS restructuring, new districts have been added to the Southeast Region. Could you comment on the effects of these changes on the new districts that have been added and the taxpayers who are served by these districts?

   The aim of the IRS restructuring efforts is to move headquarter positions closer to the front line; thereby, improving the service we are able to provide. In CEP, improvement has been realized in the following areas:

   1. Most all of the...