8.1.1. Appeals Operating Directives and Guidelines

(1) Since its establishment by the IRS in 1927, Appeals has been the administrative function within the IRS with authority to consider settlements of tax controversies and has the primary responsibility to resolve these disputes without litigation to the maximum extent possible through an administrative settlement of the matter. Since 1927, Appeals’ mission has been to resolve Federal tax controversies without litigation on a basis which is fair and impartial to both the Government and the taxpayer and in a manner that will enhance voluntary compliance and public confidence in the integrity and efficiency of the IRS.

(2) Section 1001(a) of the IRS Restructuring and Reform Act of 1998 (RRA 1998) directed the Commissioner to ensure an independent appeals function within the IRS, including the prohibition of ex parte communications between appeals officers and other IRS employees to the extent that such communications appear to compromise the independence of the appeals officers. IRC 7803(e), added by the Taxpayer First Act of 2019 (TFA), provided that this independent appeals function will be known as the IRS Independent Office of Appeals (Appeals) and codified Appeals’ role and responsibility. TFA also codified Appeals mission as shown in IRM 8.1.1.2, Accomplishing the Appeals Mission.

(1) IRC 7803(e), Independent Office of Appeals

(2) 26 CFR 601.106, Appeals Function

(3) IRM 1.2.1.9, Policy Statement for the Appeals Process

(4) IRM 1.2.2.9, Delegations of Authority for the Appeals Process

(1) The Director, Case and Operations Support is the executive responsible for Appeals’ policy and procedural guidance.

(2) The Director, Policy, Planning, Quality and Analysis (PPQA) is responsible for program oversight.

(1) See Exhibit 8.1.1-1, Common Terms Used in Appeals.

(1) IRM 1.1.7, Appeals

(2) IRS Independent Office of Appeals intranet page

(3) www.irs.gov/appeals

(4) The Taxpayer Bill of Rights (TBOR) lists rights that already existed in the tax code, putting them in simple language and grouping them into 10 fundamental rights. Employees are responsible for being familiar with and acting in accord with taxpayer rights. See IRC 7803(a)(3), Execution of Duties in Accord with Taxpayer Rights. For additional information about the TBOR, see https://www.irs.gov/taxpayer-bill-of-rights.

(1) There are certain issues or cases where Appeals may defer action or decline to settle.

(2) Appeals does not settle cases contrary to Technical Advice Memoranda (TAM) if the advice is favorable to the taxpayer, concerns an organization’s exempt status or private foundation classification, or concerns an employee plan’s status or qualification. See IRM 8.6.3, Appeals Rulings.

(3) Once Headquarters and the taxpayer agree to terms for a change in accounting method and enter into a consent agreement, Appeals will not change those terms through an administrative settlement of the matter. Chief Counsel's office can revoke or modify a consent agreement in the year of change. If the facts or law changes in a subsequent year, Appeals can change the taxpayer's method to a different method.

(4) Appeals will not consider cases where a criminal prosecution, or a recommendation for criminal prosecution, is pending for a tax-related offense, except with the concurrence of the Office of Chief Counsel, IRS’s Criminal Investigation, or the Department of Justice, as applicable. See IRM 8.7.1, Guidelines for Cases with Special Issues, and Delegation Order 8-8.

(5) In settling cases, Appeals does not apply litigating hazards to arguments raised by a taxpayer regarding the validity of Treasury Regulations or procedural validity of IRS notices or revenue procedures published in the Internal Revenue Bulletin (IRB). The preceding sentence does not apply if there is an unreviewable decision from a federal court invalidating the regulation as a whole or the provision in the regulation that the taxpayer is challenging or holding the IRB notice or revenue procedure to be invalid. For this purpose, an unreviewable decision means the decision can no longer be appealed to any federal court because all appeals in a case have been exhausted or the time to appeal has expired and no appeal was filed. Appeals can, however, apply litigating hazards to other arguments for that issue and may also settle other issues in the case based on litigating hazards. Examples of validity challenges include assertions that:

• The Treasury regulation, IRB notice, or revenue procedure did not comply with the Regulatory Flexibility Act, the Paperwork Reduction Act, or the notice-and-comment requirements of the Administrative Procedure Act, as applicable.

• The Treasury regulation is contrary to the statute or exceeds the scope of the statute.

(1) As provided in 26 CFR 601.106(b), Appeals Functions, the administrative appeal procedures do not extend to cases solely involving the failure or refusal to comply with the tax laws because of moral, religious, political, constitutional, conscientious, or similar grounds. Such arguments are given no weight in settlement.

(1) Generally, cases considered by Appeals involve a disputed tax liability. However, in some cases there is no tax liability in dispute for the period under consideration. These cases are called "No Immediate Tax Consequence" cases.

(2) Where required by law, IRS policy, regulation, ruling or procedure, Appeals considers cases that do not have an immediate tax consequence. This situation most frequently occurs when adjustments result in a potential deficiency or an overassessment but because of a net operating loss (NOL) carryback, no deficiency or overassessment results; or, adjustments are made to an NOL carryforward and the carryforward year has not been examined. Other examples of cases with no immediate tax consequences are employee plans determination cases and estate tax cases under IRC 6166, Extension of Time for Payment of Estate Tax Where Estate Consists Largely of Interest in Closely Held Business.

(3) As the IRS’s dispute resolution forum, Appeals considers these no immediate tax consequence cases when requested by the taxpayer. Exam IRM provisions discuss the procedures followed in forwarding these cases to Appeals for consideration.

(4) Taxpayers requesting an Appeals conference under the provisions of this section must file a protest addressing the proposed adjustment. See Pub 5, Your Appeal Rights and How To Prepare a Protest If You Disagree, for protest requirements.

(5) If a conference is held on a "no immediate tax consequence" case and a settlement is reached, follow normal closing procedures, including preparing a Form 5402, Appeals Transmittal and Case Memo. Identify the case on Form 5402, under "Special Features," as one involving the settlement of a "no immediate tax consequence" case. When appropriate, secure a closing agreement on all agreed cases and use closing code 03. For an unagreed case, include a statement on Form 5402 stating no agreement was reached and use closing code 13 (unagreed pre-90).

(6) Policy Statement 8-3 (Formerly P-8-50) governs reopening "no immediate tax consequence" cases. See IRM 1.2.1.9.3, Policy Statement 8-3 (Formerly P-8-50).

(7) Follow Appeals’ IRM Part 8 guidance for providing Compliance with feedback on Appeals case decisions.

(1) Appeals Area Directors often become aware of problem areas and trends through review of work units assigned within their areas. When the need arises, discuss these concerns with Compliance management officials. Quarterly meetings between Appeals and Compliance are encouraged.

(2) By providing meaningful feedback to Compliance functions, Appeals assists local management in their effort to achieve a better work product.

(3) Appeals follows established procedures as described in workstream IRMs to send hardcopy or electronic copies of Appeals Case Memorandums (ACM) and/or Forms 5402 to provide case-specific feedback to Compliance. Appeals also provides feedback loop reports or other data as agreed upon in cross-functional advisory board meetings.

(4) When feedback is warranted, the Appeals Team Manager (ATM) or Appeals Team Case Leader (ATCL) prepares a clear, concise, objective memorandum to the appropriate Compliance function. See IRM 8.6.2, Appeals Case Memo Procedures, and other IRM Part 8 guidance.

(1) To avoid controversy or disclosure, the subject matter of all speeches and articles should be Appeals practices and procedures. As a matter of policy and to avoid disclosure penalties, do not discuss cases.

(2) When the subject of a speech or article is not directly related to the IRS or Treasury matters, clearance is not required, provided there is no conflict with the policies of the IRS or Department of Treasury. Further, it must be made clear that the speaker or author does not represent the IRS or Department of Treasury.

(3) Speeches and/or articles must not cover any of the following:

• Pending legislation

• Specific cases awaiting final disposition by the IRS

• Proposed regulations, procedures and policies which have not been finally and officially announced

• Legally or administratively restricted information

(4) Discuss doubtful issues and questions on jurisdiction with the Appeals Communications Public Affairs Specialist.

(1) IRS tax cases are cases referred by or on behalf of the IRS to the Department of Justice or offices of the U.S. Attorney for defense or prosecution or other affirmative action, as well as U.S. Tax Court cases. These cases include, but are not limited to, the following:

1. Criminal tax

2. Refund litigation

3. Summons enforcement

4. Wrongful levies

5. Foreclosure of tax liens

6. Bankruptcies

7. Actions affecting personal rights of employees or former employees of the IRS

8. Federal tort claims litigation involving IRS employees

9. Freedom of Information and Privacy Act litigation

10. Treasury Inspector General for Tax Administration (TIGTA)

11. Report of Foreign Bank and Financial Accounts (FBAR)

(2) Use of an Appeals employee as a Government witness in IRS tax cases to produce IRS records or information or testify on matters discussed during the Appeals conference, or as an expert witness for the Government, is discouraged. The requesting organization must justify the need by stating the special circumstances involved. The request must be submitted to and approved by the appropriate Appeals Area Director. For additional information, see IRM 11.3, Disclosure of Official Information.

(3) Use of an Appeals employee as an expert witness for the Government should be limited to those instances where no other qualified IRS employee is available.

(1) Upon receipt of a request, subpoena, notice, order, or other demand to testify or to produce or disclose IRS records or information in cases other than those specified in the above paragraph, refer to the procedures in IRM 11.3, Disclosure of Official Information, and consult with the local Disclosure Officer.

(2) Appeals case memos may also be requested by taxpayers either informally or pursuant to the Freedom of Information Act (FOIA). They are not exempt in their entirety from disclosure. Due to the sensitive nature of these documents, coordinate all taxpayer requests for Appeals case memos with both Area Counsel and the local Disclosure Officer. Refer to IRM 37.1.2, Chief Counsel Directives Manual, Disclosure of Information, and IRM 11.3, Disclosure of Official Information, for guidance.