IRS Proposes Changes in Tax Court Appeals Process

The Internal Revenue Service has issued a set of proposed changes in the administrative appeals process for cases docketed in the U.S. Tax Court.

Notice 2015-72 provides a proposed revenue procedure that would update Rev. Proc. 87-24. Since Rev. Proc. 87-24 was issued in January 1987, the IRS pointed out the agency has been reorganized several times, the volume of litigation in the Tax Court has increased, and the IRS has adopted new policies and procedures to more efficiently manage the IRS’s work load. Thus, Rev. Proc. 87-24 needs to be updated to more accurately reflect the procedures utilized in managing the flow of docketed cases between the Office of Appeals and the Office of Chief Counsel.

The IRS cautioned that the proposed update is not intended to materially modify the current practice of referring docketed cases to Appeals for settlement currently utilized in the vast majority of cases. “The proposed revenue procedure describes the policies to ensure that docketed cases are handled consistently nationwide,” said the IRS. “Additionally, the proposed revenue procedure updates official titles and removes the exclusion for cases governed by rulings by the National Office in employee plans and exempt organizations to reflect recent organization changes in the Tax Exempt and Government Entities Division.”

The proposed revenue procedure also clarifies that, except in rare circumstances, the Office of Chief Counsel will refer cases docketed in Tax Court to Appeals for settlement consideration. However, the IRS added that it recognizes there are cases and issues that should not be referred to Appeals or for which the Chief Counsel’s office needs additional time before referring the case to Appeals. The proposed revenue procedure clarifies the procedures for when those situations arise. The proposed revenue procedure promotes the shared responsibility of the Chief Counsel’s office and Appeals to interact in a way that preserves the independence of the Appeals function. For instance, the proposed revenue procedure clarifies that, even in docketed cases, Appeals may exclude the Chief Counsel’s office from settlement conferences with the taxpayer if Appeals determines the Chief Counsel’s involvement will not further settlement of the case.

The proposed revenue procedure also addresses coordination if a taxpayer raises a new issue while the docketed case is in Appeals. Finally, the proposed revenue procedure describes procedures for requesting assistance from the Chief Counsel while the docketed case is in Appeals, and the internal procedures for handling and transferring custody of the administrative file for docketed cases referred to Appeals.

Because the provisions in the proposed revenue procedure affect a taxpayer’s case that is docketed in Tax Court, the IRS is asking for comments on the proposed procedures by Nov. 16, 2015.