Appeals Archives - TAX CONTROVERSY 360

Weekly IRS Roundup December 4 – December 8, 2023

by Kevin Spencer and Evan Walters | Dec 12, 2023 | IRS Guidance, Tax Reform

Check out our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of December 4, 2023 – December 8, 2023.

December 4, 2023: The IRS released Internal Revenue Bulletin 2023-49, which includes the following:

Revenue Ruling 2023-22, which establishes certain interest rates pursuant to § 6621 of the Internal Revenue Code (Code) for the calendar quarter beginning January 1, 2024.
Notice 2023-76, which updates the corporate bond monthly yield curve and corresponding spot segment rates for November 2023 used under § 417(e)(3)(D), the 24-month average segment rates for November 2023 and the 30-year Treasury rates, as reflected by the application of § 430(h)(2)(C)(iv).
Proposed regulations regarding excise taxes on taxable distributions made by a sponsoring organization from a donor advised fund. Comments and requests for a public hearing must be received by January 16, 2024.
Announcement 2023-34, which revokes § 501(c)(3) determinations for certain organizations and stipulates that contributions made to the organizations by individual donors are no longer deductible under § 170(b)(1)(A).
Proposed regulations that provide guidance on the statutory disallowance of qualified conservation contributions made by partnerships and S corporations if the amount of the charitable contribution exceeds 2.5 times the sum of each partner’s or S corporation shareholder’s relevant basis. Comments must be received by December 20, 2023.
A Notice of Proposed Rulemaking that reopens the comment period for proposed regulations relating to the determination and recognition of taxable income or loss and foreign currency gain or loss with respect to a qualified business unit pursuant to § 987. Comments and requests for a public hearing must be received by February 12, 2024.
Revenue Ruling 2023-21, which provides the applicable federal rates for December 2023.

December 6, 2023: The IRS announced that it sent more than 20,000 letters to taxpayers disallowing Employee Retention Credit (ERC) claims. These letters are part of the ongoing IRS initiative against dubious ERC claims involving entities that did not exist or did not pay wages during the eligibility period.

December 7, 2023: The IRS requested applications for nomination to the Electronic Tax Administration Advisory Committee through January 31, 2024.

December 7, 2023: The IRS released Revenue Procedure 2023-41, which prescribes discount factors for the 2023 accident year for use by insurance companies in computing discounted unpaid losses pursuant to § 846 and discounted estimated salvage recoverable pursuant to § 832.

December 8, 2023: The IRS released Notice 2023-79, which sets forth the 2023 Required Amendments List that applies to § 401(a) and § 403(b) individually designated plans.

December 8, 2023: The IRS released Revenue Procedure 2024-8, which provides a list of qualified census tracts for each state, the District of Columbia and Puerto Rico for issuers of qualified mortgage bonds [...]

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The Results are in: IRS Appeals Retains Discretion to Continue to Allow Exam Teams and Chief Counsel to Attend Conferences

by Kevin Spencer and McDermott Will & Emery | Sep 14, 2021 | IRS Appeals

The IRS Independent Office of Appeals (IRS Appeals, Appeals) has seen many changes over the past several years. One of the more controversial and publicized change related to the 2017 pilot program to test whether inviting Large Business & International (LB&I) exam teams and Chief Counsel attorneys to engage with taxpayers and their representatives at the IRS Appeals conference would improve Appeals’ ability to work large, complex cases. The pilot program technically applied only to IRS Appeals’ largest and most complex cases, however, the IRS also revised the Internal Revenue Manual to provide IRS Appeals with discretion to invite exam teams and Chief Counsel attorneys to any conference. The pilot program ended on May 1, 2020, and the IRS has been gathering feedback and data from multiple sources (both within and outside the IRS) to determine the effectiveness of the program.

The results are in, as reflected in the recently released Appeals Team Case Leader Conferencing Initiative: Summary of Findings and Next Steps (IRS Appeals Summary). Generally, IRS Appeals Officers found that the exam team’s participation improved their understanding of the dispute and helped them identify, narrow and resolve factual and legal differences between the parties before engaging in settlement negotiations with taxpayers. On the other hand, some taxpayers expressed concerns over the presence of exam teams and Chief Counsel attorneys because they found it hindered the ability to resolve cases without litigation and required more concrete ground rules before the start of the conference.

The IRS Appeals Summary concluded that the process was generally helpful and that IRS Appeals would be given discretion to invite exam teams and Chief Counsel attorneys to attend the IRS Appeals conference in the future. In exercising such discretion, the Appeals Officer must consider several factors and solicit and consider both the taxpayers’ and the exam team’s views as to whether joint participation would be helpful.

Practice Point: Our experiences with the exam team and Chief Counsel attorneys attending the IRS Appeals conference has been mixed. Similar to concerns raised by other taxpayers, we have seen certain IRS personnel repeatedly interrupt the taxpayer during the presentation of their case and offer the exam team’s views of an acceptable settlement. However, we have also seen situations where the IRS Appeals Officer has been able to hold IRS personnel accountable by questioning factual and legal positions. In any event, exam team participation is here to stay and LB&I taxpayers and their representatives need to be aware of the new ground rules in this area.

Prior coverage of changes within the IRS Appeals can be accessed below.

IRS Funding Woes Likely To Continue

by Kevin Spencer and McDermott Will & Emery | Jun 29, 2017 | IRS Appeals, IRS Audits, Uncategorized

The House Appropriations Committee (HAC) yesterday released the fiscal 2018 Financial Services and General Government Appropriations bill, which sets forth proposed annual funding for the Treasury Department, the Judiciary, the Small Business Administration, the Securities and Exchange Commission, and other related agencies. The proposal will be considered in the subcommittee today. For text of the bill, see here.

In its press release, the HAC described the bill as one that would “slash the IRS, fund US courts, invest in programs to boost economic opportunity, and scale back harmful regulations.” See here for the press release. The HAC was particularly hard on the Internal Revenue Service (IRS), proposing to cut its budget by $149 million. These cuts come after successive reductions in the IRS’s budget for the last several years. The draft legislation contains several provisions that the HAC believed necessary “to address underperformance and previous poor management and decision-making at the IRS,” including:

A prohibition on a proposed regulation related to political activities and the tax-exempt status of IRC section 501(c)(4) organizations. The proposed regulation could jeopardize the tax-exempt status of many nonprofit organizations, and inhibit citizens from exercising their right to freedom of speech;
A prohibition on funds for bonuses or to rehire former employees unless employee conduct and tax compliance is given consideration;
A prohibition on funds for the IRS to target groups for regulatory scrutiny based on their ideological beliefs;
A prohibition on funds for the IRS to target individuals for exercising their First Amendment rights;
A prohibition on funds for the production of inappropriate videos and conferences;
A new prohibition on funds to implement new IRS guidance on conservation easements;
A new prohibition on funds to determine church exemptions, unless the IRS Commissioner has consented and Congress has been notified; and
A requirement for extensive reporting on IRS spending and information technology.

Despite reducing the IRS’s overall budget, the draft legislation expressed a desire for funding to improve taxpayer services, including pre-filing assistance and education, filing and account services, and taxpayer advocacy services. For example, the IRS is directed to maintain an employee training program that includes “taxpayers’ rights, dealing courteously with taxpayers, cross-cultural relations, ethics, and the impartial application of tax law.” As we have previously discussed (see here and here), taxpayers’ right is a hot topic in both the US and around the world.

We will continue to monitor this matter and report back on the final budget in the future. Needless to say, reductions in the IRS’s budget will likely continue the trend of decreased enforcement activity and more uncertainty for taxpayers. Additionally, without additional resources and the imminent retirement of a large portion of IRS employees, the IRS will continue to be forced to operate in an environment of substantially decreased resources. On the front lines, we are seeing a substantial reduction in the numbers and breadth of audits of some of the nation’s largest taxpayers. Moreover, with the decrease [...]

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Appeals Large Case Pilot Program Draws Criticism

by Robin L. Greenhouse | Jun 15, 2017 | IRS Appeals, IRS Audits, IRS Guidance, Uncategorized

In October 2016, the Internal Revenue Service (IRS) revised the Internal Revenue Manual (Manual) 8.6.1.4.4 to provide IRS Appeals Division (Appeals) with discretion to invite representatives from the IRS Examination Division (Exam) and IRS Office of Chief Counsel (Counsel) to the Appeals conference. Many tax practitioners opposed this change, believing that it undermines the independence of Appeals and may lead to a breakdown in the settlement process.

In May 2017, the American Bar Association (ABA) Section of Taxation submitted comments recommending the reinstatement of the long-standing Manual provision regarding the limited circumstances for attendance by representatives from Exam and Counsel at settlement conferences. Additionally, the Tax Section’s comments were critical of the practice whereby some Appeals Team Case Leaders (ATCLs) in traditional Appeals cases are “strongly encouraging” IRS Exam and the taxpayer to conduct settlement negotiations similar to Rapid Appeals or Fast Track Settlement, such that many taxpayers do not feel they can decline such overtures. The Tax Section comments suggested that the use of Rapid Appeals Process and Fast Track Settlement should be a voluntary decision of both the taxpayer and IRS Exam and the use of these processes should be the exception rather than the rule. (more…)