"Corporate Tax Audit Survival" by Cliff Jernigan.

Readers of Cliff Jernigan's book on the Internal Revenue Service's Large and Mid-Size Business Division are in for a real treat, beginning with the foreword by Larry Langdon, former LMSB Commissioner. Cliff, who served as one of the original Senior Industry Advisers in LMSB, was recruited into the IRS by Larry Langdon. That both men spent most of their careers as corporate tax executives adds depth to the book, since the IRS has not been known to hire that many "outsiders" in its executive ranks.

Reading the book brought back some very pleasant memories of the organization where I spent 30 years of my adult life before retiring as a "career" executive. What is interesting from the beginning is Cliff's description, as a former corporate tax person, of this new division of IRS. Cliff accurately describes the formation of LMSB and takes the organization forward into its second generation of leadership when Deborah Nolan took over as LMSB Commissioner.

Cliff's story of his move to the IRS (which he calls "the Dark Side") reminds readers that the careful screening, including examination of tax returns, puts "outsiders" on a par with newly hired "career" employees. I can attest to the excellent reputations of both Larry Langdon and Cliff Jernigan since I worked very closely with them in my capacity as Executive Director of Tax Executives Institute. Larry also had early experience with the Chief Counsel's Office at the IRS, and the IRS was fortunate to later have Larry as a member of the Commissioner's Advisory Group during my years in the Commissioner's office as Deputy Commissioner.

Cliff establishes credibility while constructively criticizing the LMSB organization in the way it dealt with project management, time management, and communication. I particularly enjoyed his real life experience in the world of "acronyms." In his description of The IRS--A Secret Society, Cliff wrestled with his preconceived ideas of IRS employees only to find that they are caring, proud, and loyal.

In his chapter entitled The IRS and Industry--The People and the System, where Cliff describes his role as a Senior Industry Adviser reporting to one of the five Industry Directors, he is able to distinguish what it is like in government compared with private industry. Even though he found few "workaholics" in his post of duty, he acknowledges that there are many of this type of individual in the IRS's field and national office as well as in Chief Counsel operations. Cliff underscores this point in Chapter 2 (Stand-up) when he refers to many of the LMSB executives as "patriots." Cliff describes working with union representatives as a major challenge, though in my experience the most effective IRS managers were those who embraced the challenge.

Cliff covers the existing initiatives and identifies many new programs in a chapter on IRS Taxpayer Initiatives. Four of the initiatives (Limited Issue Focused Examinations (LIFE), Fast Track Appeals Settlements, Joint Audit Planning Process and Compliance Assurance Process), he reports, contain the keys to success in dealing with the IRS and getting certainty back into corporate planning. This chapter also contains Cliff's comments on Corporate E-filing, which despite the serious problems

that may exist in implementing for 2005 Forms 1120 (to be filed in 2006), Cliff believes has positive aspects.

Cliff devotes an entire chapter to IRS Audit Concerns. He stresses the LMSB objective of reducing the length of audit time by using the many initiatives discussed earlier in the book. He also reminds readers of the somewhat shocking fact that 50 to 75 percent of the LMSB personnel could be retired during the first ten years of the division's operation. Another interesting observation was that revenue agents are disheartened when cases are settled in Appeals, which perhaps reflects a misapprehension of Appeals' primary objective to settle cases before subjecting the taxpayer and government to costly litigation. Chapter 9 contains 12 Hints to Conducting a Successful Audit. This chapter should be a "must read" for corporate taxpayers and their representatives. They also serve as an important reminder to IRS audit teams. With Cliff's emphasis on developing trust and being professional, the readers will see that the "Don't give them a darn thing" mentality is no longer a good approach with IRS teams.

Cliff also describes the various parts of Congress and the Treasury Department that affect the IRS. Without diminishing the importance of congressional oversight and budget appropriation--or even the influence of the Joint Committee on Taxation--it is the part of the Treasury Department called the Treasury Inspector General for Tax Administration (TIGTA) that perhaps plays the most significant role. (Certainly, the TIGTA reviews of IRS programs and problems are more plentiful.) After reviewing TIGTA's role, Cliff voices the opinion that the organization is overstaffed.

Legal support for LMSB comes from the Office of Chief Counsel, including the LMSB Division Counsel. It is interesting that the first Division Counsel was Linda Burke, formerly at Alcoa and, like Larry Langdon, a former TEI President. Cliff documents the vital role Counsel plays throughout the LMSB Division. Another chapter is devoted to Appeals, another part of the IRS with a close relationship to LMSB. Emphasizing the need to improve the relationship between Examination and Appeals, Cliff repeats his assertion that Examination personnel resent the role of Appeals. Whether this is true or not, corporate taxpayers have not been reluctant "to take their chances" with Appeals.

Cliff next turns to the importance of Advocacy before the IRS. Credit is given to TEI, the American Institute of Certified Public Accountants, and the American Bar Association, as well as smaller associations. Cliff's comments about the Industry Director's Directive (IDD) provide a clearer explanation of this type of directive along with concrete examples of problem resolution. Cliff also discusses Advocacy before the Congress, an area to which he devoted considerable attention before joining LMSB. In these chapters, Cliff offers up his own practical ideas for advancing the legislative and regulatory needs of a corporation and its outside representatives.

The closing chapter of Cliff's book is entitled Charting the Future of LMSB. Cliff gives himself good marks in improving relations between industry and the IRS, as well as for the reduction of audit time on large corporate cases. Cliff presents LMSB and its employees in a positive light by reporting that the many initiatives introduced during his four-year stay with the IRS will continue to bear fruit.

Cliff Jernigan's documentation of his work as a senior industry adviser in the LMSB Division of the IRS is the first in-depth view of an outsider to one of the four new divisions of the IRS, as restructured. Cliff conveys a clear message that the large corporate community can benefit by making use of the LMSB initiatives that have evolved since the "start up" of LMSB.

Michael J. Murphy is a tax group consultant with Sutherland Asbill & Brennan LLP. He formerly served as Deputy Commissioner of Internal Revenue (1987-1992) and Executive Director of Tax Executives Institute (1992-2002).