8.6.2. Appeals Case Memo Procedures

(1) Appeals is the only administrative function of the Service with authority to consider settlements of tax controversies and has the primary responsibility to resolve these disputes without litigation to the maximum extent possible. Appeals’ mission is to resolve tax controversies, without litigation, on a basis which is fair and impartial to both the Government and the taxpayer in a manner that will enhance voluntary compliance and public confidence in the integrity and efficiency of the Service. Appeals accomplishes this mission by considering protested and Tax Court cases, holding conferences, and negotiating settlements in a manner which ensures Appeals employees act in accord with the Taxpayer Bill of Rights (TBOR) in every interaction with taxpayers, IRC 7803(a)(3). See also Pub 5170, Taxpayer Bill of Rights.

(1) Public Law 111-274, also known as the Plain Writing Act of 2010, establishes that Government documents issued to the public must be written clearly and for other purposes. The term ‘‘plain writing’’ means writing that is clear, concise, well-organized, and follows other best practices appropriate to the subject or field and intended audience.

(1) The Director of Case Operations and Support is responsible for providing technical and procedural guidance to the field, training, establishing and maintaining policies and standard procedures for Appeals work streams, conducting operational reviews, providing information on case work flow, identifying and resolving issues that impact Appeals stakeholders, coordinating advisory boards, providing coordinated and complete Appeals responses to GAO and TIGTA reports, overseeing the Appeals Internal Management Document program, developing and implementing alternative dispute resolution programs, and providing oversight and program direction for the Appeals Quality Measurement System (AQMS) and case support functions.

(2) This IRM section focuses on providing procedures for preparing Appeals Case Memorandums that are clear, concise, well-organized, and adequately explain the basis for the decision made.

(1) Policy, Planning, Quality, and Analysis (PPQA) provides trends and data analyses and detailed summary reports for Appeals.

(1) See IRM 8.1.1-1 Exhibit, Common Terms Used in Appeals, for common terms and definitions used in IRM Part 8.

(2) The table lists commonly used acronyms and their definitions:

(1) This IRM is the primary source of guidance for writing ACMs.

(2) Plain Writing Act of 2010.

(3) The IRM Style Guide

(4) Grammar Corner

(1) Summary and Recommendation: The Summary and Recommendation is the first section of your narrative and is required in all ACMs. It briefly summarizes the issue and the recommendation. This section should contain enough information to cover all the most important matters, yet still be concise enough that the reader doesn’t feel bogged down in details.

Note: If the issue is simple, this section may be all that's needed. Include a summary and brief analysis of what the taxpayer and examiner did or said. Briefly state the rationale for the recommendation. Include the litigating hazards facing the government and how they affect the settlement.

(2) Brief Background: This is an optional section, used to describe anything general to the entire issue. Think of this section as a way to give the reader just the basic facts. Save other facts for later, and put them where the reader needs them. This section doesn't include controversial statements. It simply says enough to give context for what follows.

(3) Discussion and Analysis: This is the main section for a detailed discussion of the issue. Along with the "Schedule of Adjustments" and the initial framing of the issue, this section also serves as a rough draft ACM. Make this section clear and concise by providing a blueprint or outline of the discussion to follow. In a complex issue discussion, good structure is essential.

(4) My Evaluation: This section serves as a recap of the relevant factors and the weight assigned to each. This analysis clearly illustrates the settlement rationale and is particularly important on complex issues and those with hazards of litigation settlements.

(1) The ACM is the ATE's summary of the issue(s) and recommended resolution. It should persuade the Appeals Team Manager (ATM) that the ATE appropriately considered and analyzed all important facts, arguments, and law. However, the ACM is a flexible document. Depending on whether the issues are agreed or unagreed, simple or complex, your ACM can take a number of formats.

(2) The following are four ways to communicate the results of a case:

Document	Description
Form 5402, Appeals Transmittal and Case Memo	This form is part of all ACMs, and sometimes is all that's needed. Write the case explanation in the "Remarks and/or ACM" section for very simple cases, or when the taxpayer concedes in full. See IRM 8.6.2.3.2.
Schedule of Adjustments	This schedule is part of all ACMs, when just using a Form 5402 isn't enough. Think of it as a summary. Use brief phrases to list the issues, and use columns to show the following: the "Examiner’s Adjustment", "Appeals Change to Adjustment", "Appeals Adjustment" When a narrative isn't needed, the "Schedule of Adjustments" (combined with Form 5402) is the entire ACM. See IRM 8.6.2.4.
Schedule of Adjustments with a Brief Narrative	Sometimes a simple explanation is needed, along with the "Schedule of Adjustments". See IRM 8.6.2.5.
Schedule of Adjustments with a Longer Narrative	A longer narrative might be necessary if the case is unagreed, involves a hazards settlement, or contains complex legal or factual issues. The longer narrative has quite a bit of flexibility. It could include four major sections; but only the first one (Summary and Recommendation) is required. The longer narrative tells the full story of an issue. See IRM 8.6.2.6.

(3) For Collection-sourced work units, consider using the following documents to limit your written analysis:

1. Use Form 14559 and Form 14561 together to reduce the overall written narrative for an offer acceptance or rejection. Use the "Comments" section to briefly explain changes or disagreements.

2. Use Form 14561 to limit the written analysis when financial analysis is needed for any Collection case in Appeals.

(1) "Plain language" writing has widespread acceptance, and it should be used in all Appeals writings. If a document is prepared for use by the public, the Plain Writing Act of 2010 requires federal agencies to prepare written communication that's clear, concise, and well-organized. This "Act" also requires employees to follow other "best practices" appropriate to the subject, field, and intended audience. See Public Law 111-274.

(2) This writing style encourages individuals to write the way they talk. Ask the question, "How would I say the words if my reader was standing in front of me?" Then use those words when writing. "Plain language" is described as follows:

1. A spoken style - using ordinary words, personal pronouns, active voice, contractions, a variety of punctuation, and relatively short sentences.

2. A clear organization - starting with the main point.

3. An obvious layout - using short paragraphs, headings, and bullet lists.

(3) See the following examples of conversational style writing:

(4) See Federal Plain Language Guidelines at www.plainlanguage.gov and Document 12835, The IRM Style Guide for additional information

(5) Visit the IRS Style Guide and The Style Files for assistance with grammar and punctuation.

(1) Use plain language to prepare "ACMs" and "ACM Attachments" to Determination Letters and Decision Letters. Write the narrative in a clear, concise, and professional manner. Use conversational style writing. See IRM 8.6.2.2.3 (3).

(2) Consider the intended audience when preparing the ACM or ACM attachment. Tailor the discussion to the primary reader's needs.

1. For an ACM, the primary reader is the Appeals Team Manager (ATM).

2. For an ACM attachment to a Determination letter or Decision letter, the taxpayer and ATM are the primary readers.

(3) There could be important secondary readers, but the ACM's focus must remain with the primary reader(s). See below for examples of secondary readers.

(1) Consciously strive to keep the "main point" in front of the reader. It's best to have the main message up front and to provide breaks in the text that point out each new main message.

(2) Keep the message impossible to overlook. The prescribed format for ACMs helps emphasize the main points.

(1) A "good layout" shows the reader "good organization." Consider labeling headings or topics and use white space between. The importance of both white space and simplicity shouldn't be underrated. When used correctly, they make the written report easier for the reader to understand while helping the text flow.

(2) Draw the readers' attention to information they need to know, and consider using the following techniques:

• Use informative headings

• Use bulleted, alphabetical, or numerical lists

• Use short paragraphs

• Vary the alignment of the text - Left, right, and center aligning could result in different effects on a page

(3) Graphic designers use the "dollar bill rule." The rule says that if a block of text is larger than the size of a dollar bill, it might be too big. At that size, it appears intimidating to the reader and could take a lot of time to read and digest the information.

(1) Access Form 5402 on ACDS in APGolf under the name "5402 – Customized". The non-customized version isn't acceptable because it doesn't record and save information for sharing with the operating divisions. Also, it isn't pre-programmed with the most up-to-date processing instructions for the APS employees.

(2) The "Utilities" menu on ACDS contains instructions for completing each variation of the Form 5402. For a list of Customized Form 5402 instructions, visit Appeals’ ACDS web page.

(3) When selecting "5402 – Customized", the APGolf forms generator recognizes the category, type, source, and feature codes - and opens a form specifically tailored for the selected case.

(4) The form automatically loads with the taxpayer's name, address, TIN, tax periods, feature codes, project code, category code, type code, and other relevant information contained in the ACDS case record.

(5) After opening the form, conduct a data accuracy check of all information automatically loaded into the form. "Type codes" and "feature codes" are important. Follow established procedures for correcting errors in the data. Data accuracy is an important component of the customized Form 5402. Make all authorized updates through CARATS or the Validation Tracking System; otherwise, request that APS make the update or correction. See IRM 8.10.3 , Appeals Inventory Validation Process. All data errors must be corrected before preparing and submitting the final Form 5402.

(6) The ATE can change certain pre-populated fields (i.e. taxpayer name and address) on the Form 5402 input screen for one-time use in generating Form 5402, but changes to pre-populated data from a source field on ACDS, such as CASES or CARATS, can't be saved from the input screen. You must update source field data from the source field, such as directly from CARATS or the Validation Tracking System, or through an APS update request. For convenience, the data field pre-populated from a source field in ACDS is "colored yellow" on the Form 5402 input screen. "White data fields" on the Form 5402 input screen are populated by the user input. The information in "white fields" is saved and used to pre-populate subsequent Forms 5402.

(7) APGolf generates Form 5402 in PDF file format, allowing the ATE to open and save the file in PDF format. APGolf programming prevents users from opening and editing Form 5402 in MS Word. It isn't acceptable to edit a saved copy of the customized Form 5402 in Word. If you need to make changes or updates, you must edit subsequent forms from the input page. As a result, the most current data is stored for feedback loop reports to the operating divisions and the next time the form is accessed, it pre-populates with "source information" in "yellow fields" and the "last saved entries" in "white fields".

(8) See the following for details about the Customized Form 5402:

(9) ATEs can automatically "save" Form 5402 PDF case file attachments to ACDS by checking the ATE "Sign" checkbox, or they can manually upload files from "CARATS" or other case file attachments' entry points. Employees who have the appropriate ACDS permission can view ACDS case file attachments from the "Search" function. See additional information below about the "file name" for automatically saving Form 5402 PDF case file attachments.

(1) Sometimes all comments and rationale about the case could fit into the "Remarks" section of the Form 5402. In these instances, the Form 5402 serves as the entire ACM. In the three examples described below (not all-inclusive), Form 5402 alone is sufficient; no Schedule of Adjustments is needed. IRM 8.6.2.3(2) describes when to use the Schedule of Adjustments with Form 5402.

1. Very simple agreed case:

   Example: The taxpayer previously provided receipts to the Examiner, which were not allowed because (insert reason). The taxpayer submitted the same documents to the AO. The AO considered and determined the receipts were allowable and the taxpayer was entitled to the deduction because (insert reason). . The AO conceded the issue in full.

2. Full concession by the taxpayer:

   Example: The taxpayers conceded this case in full. See the attached examination report for a discussion of the issues.

3. Full resolution by Exam upon re-involvement with the case:

   Example: The examiner considered and resolved a new issue that the taxpayer raised in Appeals for this docketed case. I concur with the findings. See the examiner's workpapers in the administrative file.

(1) Always use Form 5402 to alert the ATM and/or APS employee of significant items in the case that must be promptly addressed. "Alerts" could include the following:

1. Imminent statute date;

2. Amount(s) of advance payment(s) and payment period(s);

3. IRC 6603 deposit(s) and deposit period(s);

4. IRC 6404(g) interest suspension;

5. Court jurisdiction, if appropriate;

6. Special processing instructions;

7. Special assessment instructions; and/or

8. A "note" that the taxpayer's settlement affects other period(s) or related taxpayer(s). See IRM 8.6.2.8.

(1) For cases worked outside the Appeals Team Case Leader (ATCL) Operations and the Issue Management System (IMS), the Appeals Team Managers (ATM) will forward ACMs and Form 5402 via encrypted E-mail to a centralized point of contact within LB&I and to the LB&I Team Manager. The ATM will do the following:

1. Send the ACM and Form 5402 feedback via encrypted E-mail to the Outlook mailbox at lbi.acm.distribution@irs.gov and to the LB&I Team Manager;

2. Include in the email subject line the Appeals Work Unit Number (WUNO) assigned to the case;

3. Forward the feedback within 10 business days of case closing; and

4. Document the case activity record that the feedback was timely sent to LB&I.

(2) LB&I cases worked by ATCL operations will follow a separate procedure, which is described in IRM 8.7.11. See Appeals Applications Website for information about the Issue Management System (IMS).

(3) APGolf Form 5402 will automatically populate for Primary Business Codes 301 - 399, with routing information for ATCL and non-ATCL feedback routing instructions to LB&I.

(1) Appeals Technical Employees (ATEs) will upload their final ACM/5402 into the Appeals Centralized Database System (ACDS) for all cases. ATEs who work cases in other systems, for example, IMS, will also upload their final ACMs/5402s in ACDS.

(2) When uploading the ACM, ATEs will name the file using the format “WUNO-XXXXXXXXXX-ACM” (substituting the case’s actual work unit for the Xs). This format will ensure proper association with the case file and make clear that the work unit number (WUNO) originated with Appeals.

(3) Only the final version of the ACM will be maintained on ACDS. Prior versions of the ACM, if previously uploaded, must be removed.

(4) When an ATE uploads an electronic signed Form 5402 and/or final ACM to ACDS, the ATE is no longer required to include paper copies of these documents in the case file.

(5) Account and Processing Support (APS) will electronically transmit Forms 5402 and ACMs to the originating functions and otherwise follow the current guidance specified in Appeals IRM 8.20.7, Closing Procedures.

(1) List issues in an order that makes sense for the case. For example, start with the most significant issue, or group related issues.

(2) The Schedule of Adjustments frequently serves as the instructions to the Tax Computation Specialist. It's important to list all issues shown on the examiner's report, even if they weren't protested. The examiner's index (on Form 4318 or Form 4700) provides a list of the examiner's adjustments, including statutory adjustments.

(1) Specifically identify and list the issue(s) on the Schedule of Adjustments as illustrated below and in the example at IRM 8.6.2.4.5 (4).

1. Income from debt cancellation

2. Schedule C gross income

3. Passive activity loss from S Corporation

4. Self-employment tax

5. Self-employment tax deduction

6. Itemized deductions

7. Exemption deduction

8. Accuracy-related penalty

(2) Use this section to identify unusual items such as:

1. A new issue [See IRM 8.6.1.7.]

2. An alternative issue, as shown in the example below:

Issue Number	Description	Tax Period	Examiner's Adjustment	Appeals Change to Adjustment	Appeals Adjustment	ACM Code
21	Horse Racing IRC 183	2008	10,000	0	10,000
Alternatively, are the claimed amounts allowable under IRC 162?

3. Claim amounts - show "date filed" and "adjustment amount." For multiple claims, attach a separate schedule. See the example below:

Issue Number	Description	Tax Period	Examiner's Adjustment	Appeals Change to Adjustment	Appeals Adjustment	ACM Code
19	Depreciation	2008	(3,000)	(4,000)	(7,000)
Claim timely filed on 6/15/10 for additional depreciation.

Note: The "Examiner’s Adjustment" is the amount that the examiner allowed ($3,000). The "Appeals Change to Adjustment" is the additional $4,000 amount allowed by Appeals. Thus, in this example, the total reduction allowed (or "Appeals Adjustment") is $7,000 (as a result of the claim). This represents the additional depreciation deduction or the increase in the depreciation deduction "shown on the return or the previously adjusted amount."

(1) Use the "Schedule of Adjustment" for more than one tax period. See IRM 8.6.2.4.5 (4).

(1) This is an adjustment to an income item, deduction, credit, penalty, or tax. Substitute a word, such as "applies", if a dollar amount doesn’t work. See IRM 8.6.2.4.5 (4).

(2) The "Examiner’s Adjustment" is generally the only column that can be completed when preparing a rough draft Schedule of Adjustments.

(1) This column illustrates the addition or subtraction necessary to get from the "Examiner’s Adjustment" to "Appeals Adjustment." Show (in brackets) the reductions to the "Examiner’s Adjustments."

(2) If a dollar amount doesn’t work, substitute a word, such as "sustained" or "conceded." See the example below.

(3) If the issue is unagreed, use this column to show the settlement proposal. Footnote the proposed settlements the taxpayer didn’t accept.

(4) See the following example of a "Schedule of Adjustments", and see IRM 8.6.2.4.7 for ACM codes.

(1) This is the revised adjustment to the return or "previously adjusted return amount" for an income item, deduction, credit, penalty, or tax after Appeals consideration. If a dollar amount doesn’t work, use a word. See example in IRM 8.6.2.4.5 (4).

(1) You may use ACM codes instead of narrative explanations for issues in the following situations:

(2) Don't use an ACM Code when the issue is settled based on hazards, new issues are raised (other than computational or automatic adjustments), or if the substantiation is oral testimony. If either situation applies, a narrative explanation is necessary.

(3) Consider the guidance throughout IRM 8.6.2 to determine whether it's acceptable to use an ACM code, especially in regards for ACM Code C.

(1) The Summary and Recommendation is the first section of the narrative and is required in all ACMs. See IRM 8.6.2.4 (2) for an exception. It briefly summarizes the issue and the recommendation. It's important to say enough to cover all the most important matters, yet still be concise enough that the reader doesn’t feel bogged down in details.

(2) If the issue is simple, this section may be all that's needed. Include a summary and brief analysis of what the taxpayer and examiner did or said. Also, briefly state the rationale for your recommendation. Include the "hazards of litigation" facing the government and how they affect the settlement.

(1) This is an optional section used to describe anything general to the entire issue. Think of this section as a way to give your reader just the basic facts. Save other facts for later, and put them where the reader needs them. Notice that there’s nothing controversial in the section. It simply says enough to give context for what follows.

(1) This is your main discussion, so it needs a clear structure. Also, this ACM section contains the most detail.

(2) This section gives the essence of both sides’ contentions, sets out new information provided at the conference, and analyzes the law and applicable case law arguments. Clearly present each main point. In this way, you'll have a blueprint for your discussion.

(3) Present the discussion in an order that's best suited for the issue. Consider the following methods:

1. Start with the taxpayer’s position - if the taxpayer has specific distinguishable arguments.

   Example: The taxpayer’s husband contends that he paid his wife wages and she performed the work of an employee.

2. Begin with a brief paraphrase of the law - if the taxpayer doesn't have specific arguments.

   Example: According to Treasury Reg. section 1.1362-6, for an election to be timely filed for a tax year, a completed Form 2553 must be filed by March 15th of the year. All shareholders of the corporation (at the time of the election) must consent to the election.

(4) If the examiner and the taxpayer have presented case law arguments, distinguish the citations and compare them and their applicability to the facts of the issue. If you need to analyze an issue or point of law in depth, give your analysis completely - but without unnecessary verbiage.

(5) Distinguish alleged facts from verified or accepted facts.

(6) Use dates, if important, when listing events.

(1) Use this section to support the proposed resolution framed in your Summary and Recommendation section. Normally, this section will be necessary for issues which are:

• Unagreed.

• Resolved based on hazards of litigation.

• Factually or legally complicated.