8.26.2. Fast Track Settlement for Small Business/Self Employed (SB/SE) Taxpayers

(1) A primary objective of the Internal Revenue Service (IRS) is to resolve tax controversies at the lowest level without sacrificing the quality and integrity of those determinations. Alternative Dispute Resolution (ADR) programs achieve this objective. Small Business Self Employed (SB/SE) Fast Track Settlement (FTS) is one such ADR process.

(2) The goals and process time frames in SB/SE FTS provide taxpayers more timely resolution of their tax dispute.

(3) FTS takes place while the case is in SB/SE's jurisdiction.

(4) The entire process is estimated to be completed within a goal of 60 calendar days beginning from the date the Form 14017, Application for Fast Track Settlement is accepted by the Office of Appeals (Appeals) to the date the case is closed on Appeals Centralized Database System (ACDS).

(5) FTS benefits the taxpayer and the Service because it:

• resolves issues at the earliest stage possible

• makes use of Appeals' settlement authority during the Exam process

• reduces overall case cycle time

• reduces taxpayer burden

• reduces resource needs for the Service

(1) FTS is an ADR service offered by the IRS for the purpose of enabling SB/SE Field and Specialty Examination functions, taxpayers, and Appeals to work together to resolve disputed issues while the case is in SB/SE's jurisdiction.

(2) FTS may apply when SB/SE and the taxpayer have exhausted existing issue resolution strategies within SB/SE, including the Group Manager's (GM) conference, and now want to use mediation to reach resolution.

(3) An Appeals Officer trained in mediation techniques serves as the mediator, or FTS Appeals Official (FTS Official). The FTS Official will first use mediation techniques to facilitate settlement discussion between SB/SE and the taxpayer. If resolution is not reached through mediation, the FTS Official may propose a settlement, but such proposal is not imposed on either party.

(4) FTS allows the parties to utilize Appeals' settlement authority under Delegation Order 8-9 when needed to effect an agreement between SB/SE, the taxpayer and the FTS Official that is based on the hazards of litigation. See IRM 1.2.47, Servicewide Policies and Authorities, Delegation of Authorities for the Appeals Process, and IRM 8.6.4, Conference and Settlement Practices - Reaching Settlement and Securing an Appeals Agreement Form.

(5) If a resolution is not reached using FTS, a taxpayer retains the right to request traditional Appeals consideration. Post-appeals mediation, however, is not available for any issue considered during the FTS process if the parties fail to resolve the issue or if either party withdraws after the start of the process. See Rev. Proc. 2014-63, 2014-53, I.R.B. 1014 and Rev. Proc. 2017-25, 2017-14 I.R.B. 1.

(1) Delegation Order 8-9 (IRM 1.2.47) contains the IRS Commissioner's delegation of settlement authority to Grade 14, 13 and 12 Appeals Officers assigned to be FTS Officials for SB/SE FTS cases.

(2) This delegation of settlement authority includes the responsibility of the FTS Official to arrive at the final disposition from the Government's perspective, approving the final settlement in accordance with the delegated authority, and executing the appropriate closing documents. This authority may not be re-delegated.

(1) The FTS session includes the taxpayer and the SB/SE representatives with decision making authority and the information and expertise necessary to assist the parties and the FTS Official during the negotiation process. All participants actively contribute to the resolution of the case.

(2) The FTS Official has delegated settlement authority and the ability to offer a settlement in both factual and legal issues in the event the parties cannot reach settlement through the use of mediation techniques. Neither party is obligated to accept the settlement proposal offered by the mediator.

(1) FTS is generally available for non-docketed SB/SE cases with no regard to dollar amount. The case must have:

• Factual and legal issues

• Some basis in fact and or law for the conclusions reached

• Necessary referrals, technical advice, Counsel Advice and valuation reports

• No significant unresolved factual differences between SB/SE and the taxpayer’s position

• Issues for which SB/SE and the taxpayer have exhausted available issue resolution strategies including the Group Manager's conference, and now want to use mediation to reach resolution

(2) If an issue is determined not to be eligible for SB/SE FTS, all issues in the case are not eligible for SB/SE FTS.

(1) FTS is not available for:

1. Cases in which SB/SE FTS is not appropriate under either 5 U.S.C. § 572 or 5 U.S.C. § 575, which provide the general authority and guidelines for use of alternative dispute resolution in the administrative process;

2. Cases in which the taxpayer did not act in good faith during the audit process, such as, but not limited to, cases in which the taxpayer failed to cooperate or unduly delayed the audit process;

3. Correspondence examination cases worked solely in a Campus/Service Center site;

4. Partnership cases under the Tax Equity & Fiscal Responsibility Act (TEFRA);

5. Collection cases: Collection Due Process, Collection Appeals Program, Offer-In-Compromise, and Trust Fund Recovery Penalty;

6. Issues designated for litigation;

7. Issues docketed in any court;

8. Issues precluded from settlement by previous closing agreements, res judicata, or controlling Supreme Court precedent;

9. Issues for which SB/SE FTS would not be in the interest of sound tax administration. For example, issues common to issues in litigation for which it is important that the IRS maintain a consistent position, or issues common to issues in litigation over which the Department of Justice has jurisdiction;

10. Frivolous issues, such as, but not limited to, those identified in section 4.04 of Rev. Proc. 2017-2, 2017-1 I.R.B. 106, or the corresponding provision of any successor guidance;

11. “Whipsaw” issues, or issues for which resolution with respect to one party might result in inconsistent treatment in the absence of participation of another party. Examples include, but are not limited to, issues on a joint return where both spouses do not agree to participate in the same FTS Session, or where one spouse is claiming innocent spouse treatment under Internal Revenue Code (IRC) §6015;

12. Issues for which the taxpayer has submitted a request for competent authority assistance. See section 6.03 of Rev. Proc. 2015-40, 2015-35 I.R.B. 236, or the corresponding provision of any successor guidance, which describes the procedures of the U.S. competent authority for coordination with IRS examination proceedings. Under section 6.03(3) of Rev. Proc. 2015-40, the taxpayer's access to U.S. competent authority assistance is generally not affected by the taxpayer's pursuit of alternative dispute resolution programs under the jurisdiction of IRS Examination, including SB/SE FTS.
    Taxpayers are cautioned that if resolution of the taxpayer’s competent authority issue (as defined in Rev. Proc. 2015-40) is reached through the SB/SE FTS process, the taxpayer’s access to U.S. competent authority assistance will be determined in accordance with sections 6.03(1) and 6.03(2) of Rev. Proc. 2015-40. If a taxpayer enters into a closing agreement (including settlement through the SB/SE FTS process) and then requests competent authority assistance, the U.S. competent authority will endeavor only to obtain a correlative adjustment from the treaty country and will not take any actions that would otherwise change the settlement. See section 6.03(2) of Rev. Proc. 2015-40. If a taxpayer enters into SB/SE FTS, the taxpayer generally may not request competent authority assistance until the SB/SE FTS process is complete. However, the taxpayer may file a protective claim with the competent authority in the form of a competent authority request or a letter while SB/SE FTS is pending if a protective claim is necessary to keep open the period of limitations in a foreign country. See section 11.03 of Rev. Proc. 2015-40. If these requirements have been satisfied and a protective claim has been filed, the taxpayer must notify the U.S. competent authority that the case is in alternative dispute resolution in SB/SE FTS. In addition, the taxpayer must notify the FTS Appeals Official that a protective claim has been filed and that the provisions have been satisfied. The U.S. competent authority will suspend action on the case until SB/SE FTS is complete;

13. Issues outside SB/SE jurisdiction; or

14. Issues that have been otherwise identified in subsequent guidance issued by the IRS as excluded from the SB/SE FTS process.

(2) If any one issue is determined not to be eligible for SB/SE FTS, all issues in the case shall not be eligible for SB/SE FTS.

(3) The Appeals Team Manager (ATM) and the GM may agree to consider issues or cases otherwise not eligible for FTS depending on individual circumstances and the operational needs of the case.

(1) Either the taxpayer or SB/SE can initiate FTS; however, both parties must agree to the process.

(2) Ideally, FTS is initiated on fully developed eligible cases:

1. Field Exam cases: generally prior to the 30-day letter

2. Office Audit/Exam cases: at the time the taxpayer requests an Appeals conference

(3) An issue cannot be fully developed prior to the receipt of all necessary referrals, technical advice, Counsel advice, valuation reports, or other relevant documentation.

(4) If the case meets the eligibility requirements in Sec. 8.26.2.5, the examiner and/or the GM will discuss FTS with the taxpayer, explain the roles and responsibilities of each party, and the expectations and benefits of the program.

(5) SB/SE and the taxpayer will jointly complete Form 14017, Application for Fast Track Settlement.

(6) The Form 14017 must be signed by the taxpayer, the examiner and the GM or designee. A Territory Manager's (TM) signature is not required on the Form 14017 for an SB/SE FTS case.

(7) The taxpayer must provide the examiner with a brief, written statement of the facts along with a statement of his/her position.

(8) If the Form 14017 is executed by a person pursuant to a Power of Attorney executed by the taxpayer, that Power of Attorney must express the taxpayer's grant of authority to consent to disclose the taxpayer's returns and return information by the Service to third parties. A copy of the Power of Attorney must be attached to the application.

(1) SB/SE will send the approved SB/SE FTS Package, which includes the signed Form 14017 , properly documented lead sheets and workpapers supporting the examiner's position, and the taxpayer's written position and response, to the ATM FTS Point of Contact (POC) at the local servicing Appeals office.

(2) All documents in the SB/SE FTS Package are available to all parties present at the session.

(3) SB/SE and Appeals may use local procedures to meet the FTS time frames and enable effective communication between the functions.

(4) Appeals will date stamp the Form 14017 on the date received.

(1) Within 5 business days of case assignment, the FTS Official will:

1. contact the taxpayer and SB/SE to start the planning process.

2. identify, determine and confirm the participants and ensure that all decision-making parties will be present during the session. To facilitate resolution, the mediator should encourage the taxpayer's participation even if the taxpayer is represented.

3. request additional information from either party to have full understanding of the issues and will share any information received with all parties prior to the session.

4. schedule the session at the servicing Appeals Office or at another neutral site agreeable to the parties and will consider meeting at a location that has the least cost or impact to the Service. This could mean the FTS Official will travel to the examiner's Post of Duty (POD). The FTS Official should consult with his/her ATM to make this decision, be flexible in setting the meeting location, and involve the SB/SE GM and examiner in the decision. .

(1) The Appeals Official has the authority to offer a settlement in both factual and legal issues when the parties cannot reach resolution through mediation. The FTS Official should utilize his/her authority under Delegation Order 8-9 when needed to effect an agreement between SB/SE Exam, the taxpayer and the FTS Official that is based on the hazards of litigation. See IRM 1.2.47, Delegation of Authorities for the Appeals Process, and IRM 8.6.4.1.4, Judicial Attitude Toward Settlement. Neither party is obligated to accept the settlement proposal offered by the FTS Official.

(2) If the settlement proposal is accepted by SB/SE and the taxpayer, the case is closed agreed by SB/SE on the basis of the Appeals settlement.

1. The FTS Official will prepare and execute the appropriate Form 870-AD,Offer of Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and to Accept Overassessment and Form 906,Closing Agreement on Final Determination Covering Specific Matters, if applicable.

2. The FTS Official must prepare an Appeals Case Memorandum (ACM).

(3) If the taxpayer accepts the mediator’s settlement proposal, but the GM rejects it, the SB/SE TM must review the GM’s rejection and either concur in writing or accept the proposal on behalf of SB/SE.

1. If the TM concurs with the GM’s rejection of the settlement, and an acceptable alternative settlement cannot be reached, Appeals will close the FTS case as unagreed.

2. If the TM agrees with the settlement proposal, the case is closed agreed based on that proposal.

3. The FTS Official will secure the appropriate (Special Appeals Agreement Form (AD) or Form 906/866 Closing Agreement, if required) documents and forward them to SB/SE, who will close the administrative file using their standard case closing procedures.

(4) On Joint Committee cases, Appeals does not execute an AD type waiver or closing agreement until cleared by Joint Committee. Upon reaching an agreement, a Form 5402, Appeals Transmittal and Case Memo is prepared by the FTS Official stating the following:

"This case may not be closed until Joint Committee approval is received. Upon receipt of the Joint Committee letter, Appeals will execute a closing agreement and the case may then proceed through SB/SE closing procedures."

(1) The FTS Official must prepare a Form 14000 for every FTS case and include the issues and adjustment dollars in dispute. The report is used to assist in planning the session, to report on developments during the session, and to record and finalize the disposition of the issues.

(2) The FTS Official will solicit the taxpayer, representative, if applicable, and SB/SE's signatures on the report; give all session participants a signed copy; and explain that the resolution is not final until the necessary closing documents or waivers are signed. The signed Session Report represents the parties’ good faith intention to resolve the issues addressed in the report in accordance with the terms agreed upon.

(3) Form 14000 is not a waiver of restrictions on assessment; does not terminate consents to extend the statute of limitations; and does not start the running of any statute of limitations. The signature of an IRS Official on the Session Report does not preclude the reopening of the case under Policy Statement 4-3.

(1) For all issues coordinated as either an Industry Specialty Program (ISP) or Appeals Coordinated Issues (ACI), Appeals will follow the procedures in IRM 8.7.3.4, Review and Concurrence Procedures.

(2) To meet the requirements that all decision-makers attend the FTS Session and that Compliance Coordinated Issues/ACI issues are subject to the review and concurrence, the Technical Specialist (Technical Guidance or International) will serve as a team member and participate in the FTS Session with the taxpayer and SB/SE. If, for whatever reason, the Technical Specialist does not participate in the FTS session, the settlement of the ISP/ACI issue remains subject to the review and concurrence.

(1) If any issue(s) remain unresolved, the FTS case is closed on ACDS, and SB/SE will begin their "Unagreed" closing process.

(2) A taxpayer retains all traditional appeal rights.

(3) The FTS Official will destroy any notes created during the session when he/she closes the case.

(4) Unagreed cases coming to Appeals that previously participated in SB/SE FTS are assigned to a different Appeals Officer.

(5) If a resolution is not reached using FTS, a taxpayer retains the right to request traditional Appeals consideration. Post-appeals mediation, however, is not available for any issue considered during the FTS process if the parties fail to resolve the issue or if either party withdraws after the start of the process. See Rev. Proc. 2014-63, 2014-53, I.R.B. 1014 and Rev. Proc. 2017-25, 2017-14 I.R.B. 1.

(1) The SB/SE FTS process is confidential and all information and communications made during the SB/SE FTS process (both oral and written) are both taxpayer return information and dispute resolution communications subject to restrictions on disclosure. See IRC §6103 and 5 U.S.C. §§ 571(5) and 574. Therefore, no information or communications made during the SB/SE FTS process may be disclosed by any party, participant, or observer except as provided by statute, including IRC §§ 6103 and 7214(a)(8), as well as, 5 U.S.C. § 574. IRS employees who participate in or observe the SB/SE FTS process in any way, and any person under contract to the IRS pursuant to IRC §6103(n) who participates in or observes the SB/SE FTS process, will be subject to the confidentiality and disclosure provisions of the Internal Revenue Code, including §§6103, 7213, and 7431, as well as, 5 U.S.C. § 574.

(2) In executing the Form 14017, the taxpayer consents to the disclosure by the IRS of the taxpayer’s returns and return information incident to the settlement process to any participant or observer for the taxpayer.

(3) If the application is executed by a person pursuant to a Power of Attorney executed by the taxpayer, that Power of Attorney must clearly express the taxpayer’s grant of authority consenting to disclosure of his/her returns and return information by the IRS to third parties, and a copy of the Power of Attorney must be attached to the Application.

(1) The prohibition against ex parte communications between Appeals employees and other IRS employees does not apply to the communications arising in SB/SE FTS. This is because the FTS Official is not acting in his/her traditional settlement role and jurisdiction of the case remains with SB/SE. See Rev. Proc 2012-18 2012-10 I.R.B. 455, for guidance on ex parte communications.

(2) On SB/SE FTS cases returned for traditional Appeals consideration, ex parte restrictions are not imposed on intra-Appeals communications. Appeals management will take appropriate measures to ensure these cases are handled fairly and impartially. Ex-parte restrictions will apply to communication between Appeals and other IRS originating functions, including SB/SE.

(1) If a settlement was reached using delegated settlement authority and is based on the hazards of litigation, the FTS Official will secure and countersign the appropriate Form 870-AD and Form 906 Closing Agreement, if applicable, and forward them to SB/SE, who will close the administrative file using their standard case closing procedures.

(2) If an agreement is reached using mediation techniques only, SB/SE will secure the appropriate agreement document(s), preferably during the FTS session, and will close the administrative file using their standard case closing procedures.