Openness Is to Implementing Ex Parte Ban on Appeals Communications.

Tax Executives Institute has submitted comments to the Internal Revenue Service on the implementation of a two-year old provision designed to ensure the independence of the IRS's Appeals organization. The provision, enacted as part of the Internal Revenue Service Restructuring and Reform Act of 1998, states that communication between Appeals personnel and other IRS employees should be curtailed to the extent it impairs the independence of the Appeals organization. TEI's comments were prompted by IRS Notice 99-50, which outlined the IRS's intended approach.

In a December 5, 1999, letter from TEI President Charles W. Shewbridge, III to IRS National Director of Appeals Daniel L. Black, TEI said that in developing guidance on the prohibition on ex parte communications with IRS Appeals officers, the question should not merely be, "Is this communication legally permissible under the statute?" Rather, the IRS should focus instead on the question, "Could this communication create an impression that Appeals' mission to provide a fair, impartial hearing has been compromised?" In other words, TEI's president noted, the IRS should err on the side of open communications between the IRS and the taxpayer.

TEI suggested in its letter that the approach in Notice 99-50 fell short of the proposed mark. In that notice, the IRS attempted to distinguish between ex parte discussions of facts or assertions in the file (which it found permissible) and such discussions of the strengths and weaknesses of an issue (which is impermissible). Mr. Shewbridge noted, however, that "the line between clarifying factual information and discussing the strengths or weaknesses of a case is a fine one and, unless care is taken, the underlying purpose of the statute may be frustrated."

TEI thus proposed that the IRS's rules (which will likely take the form of a revenue procedure) should prohibit all communications with other IRS employees except in certain specified circumstances, unless the taxpayer is invited to participate or consents to the ex parte contact.

TEI also questioned the scope of an exclusion in the proposed procedure that seemingly exempts Chief Counsel attorneys from the ex parte ban. Noting that Counsel attorneys clearly fall within the group covered by the 1998 Act, Mr. Shewbridge's letter stated that the position runs counter to the intent of Congress. "The IRS should err here on the side of maintaining a high level of taxpayer confidence in the fairness of the system," he said.

Other issues discussed in TEI's comments include the role of the Industry Specialist Program Coordinator and the effect of the prohibition on general meetings and post-settlement conferences. The Institute's letter also expressed concern about the lack of any enforcement mechanism.

TEI's comments, reprinted in this issue on page 60, were prepared under the aegis of its IRS Administrative Affairs Committee, whose chair is Robert J. McDonough, Jr.