IRS announces mediation test.

The IRS has announced a proposal to test a mediation procedure for the resolution of certain tax disputes. In Ann. 95-2, the Service stated it would hold hearings on a proposal to establish the test for one year.

The mediation procedure would be a part of the Appeals administration process within the IRS for facilitating dispute resolution. The test would apply only in a narrow set of circumstances. Mediation would be available for cases in the Appeals administrative process that have not been docketed in any court. It would be limited to Coordinated Examination Program (CEP) cases assigned to Appeals Team Chiefs. It would be optional, agreed to by both parties and nonbinding on the parties, with settlement authority remaining with Appeals. It would not be available for issues designated for litigation, Industry Specialization Program (ISP) issues, Appeals Coordinated Issues (ACI) or issues of competent authority.

The intent is to provide a facilitator to help the parties reach their own negotiated settlement. It is an attempt to resolve issues while a case is still in the jurisdiction of Appeals and should apply only after good-faith negotiations in the normal Appeals process are unsuccessful.

The parties must agree on a mediator or on a procedure for selecting a mediator. The announcement specifically provides that an Appeals representative from another IRS office or region or from National Office Appeals may be used as a mediator, in which case the expenses associated with the mediation process will be paid by the Service.

Mediation may offer an opportunity in appropriate cases to provide a fresh look at, or different perspective on, disputes in the negotiation process, by using an Appeals representative from another office or region at little or no cost to the company.