"IRS Appeals Changes Its Policy on Raising New Issues"

by Skadden, Arps, Slate, Meagher & Flom LLP
Contact

The IRS Appeals Division (Appeals) recently released interim guidance for all its officers with respect to the handling of issues raised in Appeals but not challenged during the IRS Examination Division’s (Exam) consideration of a case.1 The changes reflect the first phase of an ongoing Appeals initiative known as the Appeals Judicial Approach and Culture. Time will tell how much this initiative will impact the ability of Appeals to resolve more cases successfully, but this first step is a promising development.

Although taxpayers always have been free to raise new issues in Appeals, the government has had to meet certain long-standing materiality standards to do so. With the release of the new guidance, those standards have been strengthened considerably by increasing taxpayer protections against the government adding contested issues after a case moves into Appeals. The new policy also restricts the circumstances under which Appeals may return a case to Exam for additional factual development. The guidance is effective for all Appeals actions taken after the issuance date of July 18, 2013 and, consequently, affects not only cases protested to Appeals after that date but also all cases currently open in Appeals. As with other interim guidance, the new policy will be incorporated into the Internal Revenue Manual within 12 months.

The key changes are:

  • Appeals will not raise new issues. In nondocketed (prestatutory notice of deficiency) cases, the only exceptions to the prohibition are if the taxpayer engaged in fraud, malfeasance or misrepresentation of material fact, the standard under IRC Section 7121 provided for closing agreements.
  • An alternative argument is not considered a new issue. However, if Appeals asserts a new challenge under the guise of an alternative position, they may not develop information or evidence not already in the case file provided by Exam to support the alternative argument.
  • If Exam forwards a case to Appeals with insufficient factual development, Appeals will not return the case. Instead, the settlement will include an assessment of the factual hazards of litigation. Depending on the nature and significance of the factual development neglected by Exam, this generally can be expected to result in more taxpayer-favorable settlements. However, if the taxpayer submits information to Appeals that was not provided to the IRS during the examination, the case will be returned to Exam for consideration of the new facts.
  • Appeals also will not raise new issues in docketed cases (i.e., post-statutory notice of deficiency). However, Appeals will consider new issues the government raises in its litigation pleadings and may consider new evidence developed by Exam or Counsel to support the position.

The interim guidance continues to leave taxpayers free to raise new issues in Appeals. However, Appeals can be expected to return the case to Exam where additional development of the new issue is deemed necessary.

_________________

1 See http://www.irs.gov/pub/foia/ig/spder/AP-08-0713-03.pdf.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Skadden, Arps, Slate, Meagher & Flom LLP | Attorney Advertising

Written by:

Skadden, Arps, Slate, Meagher & Flom LLP
Contact
more
less

Skadden, Arps, Slate, Meagher & Flom LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!