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Communications Between ceived, and the proposed revenue proce- case proceeds further in the litigation
Appeals Officers And Other dure has been modified to take into ac- process. See generally Rev. Proc. 87–24,
Internal Revenue Service count the concerns raised. Specifically, 1987–1 C.B. 720. In both types of dis-
the scope of permissible communications putes, Appeals has broad authority to ne-
Employees
has been clarified, limitations have been gotiate settlements by applying a “hazards
Rev. Proc. 2000–43 placed on communications between Ap- of litigation” standard.
peals and certain employees in the Office Proceedings before Appeals have tradi-
of Chief Counsel, concerns about com- tionally followed a much less formal
TABLE OF CONTENTS
munications that take place in the context course than court proceedings. While
of multi-functional meetings have been proceedings before Appeals are designed
SECTION 1. PURPOSE AND SCOPE addressed, and other questions and an- to be fair and impartial, they are not sub-
swers have been modified. In addition, ject to judicial rules of evidence or proce-
SECTION 2. BACKGROUND new questions and answers have been in- dure. Some early legislative proposals
cluded to define key terms and clarify re- during 1998 would have required Appeals
sponsibilities of the parties, permit tax- to adopt more formal and less flexible
SECTION 3. GUIDANCE
payers/representatives to waive the processes. S. Rep. No. 1669, 105th Cong.,
CONCERNING THE EX PARTE
prohibition, and to address certain man- 2nd Sess., § 304(a) (Feb. 24, 1998), would
COMMUNICATIONS
agement issues. have established an independent Office of
Appeals in the Internal Revenue Service,
PROHIBITION DESCRIBED IN SECTION 2. BACKGROUND the head of which was to be appointed by
SECTION 1001(a)(4) OF THE and report directly to the Oversight
In 1927, the Internal Revenue Service
INTERNAL REVENUE SERVICE Board. Further, this proposal would have
established an administrative appeal
RESTRUCTURING AND REFORM barred Appeals from considering issues
process to resolve tax disputes without lit-
ACT OF 1998 not “raised” by the originating function
igation. The Appeals mission is to re-
solve tax controversies, without litigation, and prohibited “any communication” with
SECTION 4. EFFECTIVE DATE on a basis that is fair and impartial to both the originating function unless the tax-
the Government and the taxpayer. Local payer or taxpayer’s representative had an
Appeals Officers have traditionally re- opportunity to be present.
SECTION 1. PURPOSE AND SCOPE
ported to different managers than the Ser- As ultimately enacted, § 1001(a)(4) of
Section 1001(a) of the Internal Revenue vice officials who proposed the adjust- RRA 98 did not impose a comprehensive
Service Restructuring and Reform Act of ment. Appeals has historically been able overhaul of Appeals’ processes. Instead,
1998, Pub. L. 105–206, 112 Stat. 685 to settle the vast majority of the cases that that section requires the IRS, as part of its
(RRA 98), states that “The Commissioner come within its jurisdiction. reorganization plan, to establish an inde-
of Internal Revenue shall develop and im- The inventory of cases handled by Ap- pendent Office of Appeals “within the In-
plement a plan to reorganize the Internal peals falls into two major categories — ternal Revenue Service.” The plan must
Revenue Service. The plan shall ... nondocketed and docketed B determined prohibit ex parte communications “to the
(4) ensure an independent appeals by whether the case is pending in the extent such communications appear to
function within the Internal Rev- United States Tax Court. Nondocketed compromise the independence” of Ap-
enue Service, including the prohibi- cases typically involve an administrative peals. When the evolution of § 1001(a)(4)
tion in the plan of ex parte commu- protest by the taxpayer of the findings and of RRA 98 during the1998 legislative
nications between appeals officers conclusions of the Examination, Collec- process is considered in light of Appeals
and other Internal Revenue Service tion, or other IRS function that initially longstanding methods of operation, it can
employees to the extent that such considers a taxpayer’s case. The tax- be fairly concluded that Appeals must be
communications appear to compro- payer’s protest is typically followed by a accorded a significant degree of indepen-
mise the independence of the ap- conference, or series of conferences, with dence from other IRS components, and
peals officers.” the taxpayer or the taxpayer’s representa- should be mindful to avoid ex parte com-
Notice 99–50, 1999–40 I.R.B. 444 (Octo- tive, during which Appeals and the tax- munications with other IRS functions that
ber 4, 1999), set forth a proposed revenue payer attempt to reach resolution of the is- might appear to compromise that indepen-
procedure concerning the ex parte com- sues in dispute. Docketed cases involve dence. The statutory provision cannot,
munication prohibition. The proposed disputes where the taxpayer has filed a however, be interpreted as mandating a
revenue procedure provided guidance in petition in the U.S. Tax Court, contesting major redesign of the fundamental
the form of a series of questions and an- a determination made by the Service in a processes Appeals has traditionally fol-
swers that address situations frequently statutory notice of deficiency. Following lowed to carry out its dispute resolution
encountered by the Service during the the filing of the petition, taxpayers who mission.
course of an administrative appeal and in- have not previously availed themselves of The procedures set forth in this Rev-
vited public comment. The Department the opportunity for an Appeals conference enue Procedure are designed to accom-
of the Treasury and the Internal Revenue generally are afforded an opportunity to modate the overall interests of tax admin-
CONCERNING THE EX PARTE Appeals process (the originating the facts presented by the taxpayer
COMMUNICATIONS function) considered to be an ex parte and the relative importance of the
PROHIBITION DESCRIBED IN communication within the context of this facts to the determination.
SECTION 1001(a)(4) OF THE revenue procedure? ■ Discussions of the relative merits or