The Evolving Dynamic in IRS Appeals: There's a blurring of the lines between Exam and Appeals.


Every TEI member knows that a critical part of tax administration is the Internal Revenue Services Appeals process. But how has it changed in the last decade? To examine this issue, we convened an outstanding panel of corporate tax practitioners in this space, including Jean Pawlow, partner in the tax controversy practice at Latham & Watkins; George Abney, partner at Alston & Bird; and Jennifer Breen, partner at Morgan Lewis. Michael Levin-Epstein, Tax Executive's senior editor, moderated the discussion.

Michael Levin-Epstein: How has the IRS Appeals process changed over the last ten years?

Jean Pawlow: I think there has been a pretty significant shift at Appeals over the last ten years, in fact maybe even going back a little bit farther. With the introduction of the Fast Track settlement process in 2003, Appeals officers were trained in mediation techniques, and I think that the Fast Track program was really successful. Time in Appeals was shortened, the whole process was faster. You could get through things in a day or sometimes a couple of days and hash everything out. At a time when there were fewer and fewer Appeals officers, I think Appeals liked being in a situation where they had fewer resources. It was a neat tool, and I think it led directly to the Appeals Judicial Approach and Culture (AJAC) program in 2013, where Appeals said, "Look, we don't want there to be factual disputes. We are not going to introduce new arguments. Come to us, taxpayer and Exam, each side with a fully prepared case, and then we are going to be Solomon-like and resolve that." That then has evolved, because I think Appeals got used to having Exam as part of the process, and we ended up with "scope creep," where now, in many Appeals conferences, the Exam team, of course, presents their side of the case, but they are invited to stay for the taxpayers presentation of the case as well. You're starting to see, I think, these kinds of blurred lines between where does the Exam function stop and where does the Appeals process start.

George Abney: Picking up where Jean left off, I think there has been a blurring of the lines between Exam and Appeals. While alternative dispute resolution (ADR) tools--such as Fast Track and the Rapid Appeals Process--have been overwhelmingly positive, they have chipped away at the independence of Appeals. Because of ADR, Exam has grown accustomed to attending meetings between taxpayers and Appeals officers, so it is not surprising that Exam would seek to expand its opportunities to do so. So, in 2017, the IRS announced an initiative allowing Exam to attend Appeals conferences. In theory, this was supposed to improve efficiency by creating an opportunity for an open discussion of issues during Appeals...

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