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Chief Counsel revamps case-specific advice procedures to match LMSB's new enforcement paradigms.


In August 2005, the Chief Counsel of the Internal Revenue Service assembled a Task Force to suggest improvements to the procedures through which the Chief Counsel attorneys in the IRS National Office provide "case-specific advice" to the Field. (1) The Task Force completed its "Report of the Case Specific Advice Task Force" in April 2006, and at the May meeting of the Section of Taxation of the American Bar Association, the Chief Counsel outlined the planned response to the report. (2) The Task Force report shines a spotlight on two systemic problems with the old processes for issuing case-specific guidance. First, the old procedures are considered to be incompatible with the abbreviated time frame created by the so-called currency initiative of the IRS's Large and Mid-Size Business Division. Second, the disappearance of the old Field Service division eliminated a mechanism for the Field to consult with the National Office regarding case development, and the replacement procedures were underutilized. To address these issues, the Chief Counsel announced an overhaul of the National Office's case-specific guidance program, including a streamlined Technical Advice Memorandum (TAM) process and two new vehicles for providing legal advice to the Field without taxpayer input, the Generic Legal Advice Memorandum (GLAM) and the Case-Specific Legal Advice Memorandum (Shazam). (3) This article discusses the changes to the case-specific guidance program against the backdrop of two broader trends in IRS enforcement: (1) the LMSB currency initiative and (2) the migration into mainstream tax controversies of tactics that the IRS developed to address tax shelters.

* LMSB Currency Initiative. For several years, the IRS has focused on reducing the time between the taxpayer's filing of a return and the IRS's audit of that return. This "currency initiative" has provided many benefits to taxpayers, but it also has marginalized the National Office programs to provide case-specific technical guidance to the Field. The Task Force's procedural changes address this concern by placing a premium on quick turnaround of requests to the National Office for case-specific guidance. Although speedy response times may on balance be a benefit to the Field and taxpayers alike, it has other implications. The new procedures reduce or eliminate many of the opportunities for give and take between taxpayers and the IRS over the facts and law surrounding an issue.

* Migration of IRS Enforcement Strategies. During the past several years, the IRS has developed various tactics for addressing the proliferation of widely marketed tax shelters. One tactic has been formation of Issue Management Teams (IMTs) to address specific categories of widely marketed tax shelter transactions. In recent testimony before the Senate Finance Committee, Commissioner of Internal Revenue Mark Everson revealed that the IRS plans to assign IMTs to address emerging issues, (4) including non-tax shelter issues. The introduction of IMTs into mainstream tax controversies has the potential to limit severely taxpayers' ability to have meaningful input into decision-making processes with respect to their cases at LMSB and Appeals.

In sum, recent changes to the case-specific guidance process are part of a larger effort by LMSB to enhance audit currency and develop multi-taxpayer issues that can be managed by IMTs. Although this may be good news for many taxpayers, it likely comes at the cost of reduced opportunities for taxpayers to participate in the National Office's decision making process and could result in "one size fits all" tax-shelter-style IRS positions that do not fit easily into the more nuanced contexts of non-tax-shelter issues. As a result, audit cycle times may be shortened, but there may be fewer agreed audits.

The Broader Context of Changes

A. LMSB's Focus on Audit Currency Presented a Challenge to the TAM Process

The Chief Counsel has noted the connection between the Task Force's mandate and the time constraints created by LMSB's currency initiative. (5) For several years, LMSB has focused on improving the currency of IRS audits. This currency initiative is based on the idea that reducing the time between a transaction and the IRS's examination of that transaction will improve fact gathering, identify emerging issues, increase the likelihood that IRS and taxpayers can avoid or resolve controversies, and ultimately conserve IRS resources. Moreover, LMSB believes that greater currency will benefit LMSB taxpayers, who also wish to conserve resources and, under new financial accounting obligations, have a heightened interest in certainty. Accordingly, LMSB has developed several initiatives to improve the currency of audits, focus on material issues, and resolve controversies quickly. These include Fast-Track Appeals, (6) Limited Issue Focused Examinations (LIFE), (7) Pre-filing Agreements (PFAs), (8) and the Compliance Assurance Process (CAP). (9) The PFAs and CAP initiatives represent a new paradigm for achieving currency in that they allow the IRS and taxpayers to resolve potential issues before the return is even filed.

In general, these initiatives offer significant benefits to LMSB taxpayers. For many, the prospect of reducing audit cycle time, focusing on material issues, resolving controversies quickly, and obtaining certainty for financial accounting purposes are great incentives to participate. The currency initiative, however, presents practical challenges to LMSB and Chief Counsel in fulfilling their obligation to apply the tax laws fairly and uniformly among taxpayers. In particular, as audits become more compressed, there is less time for the LMSB team to seek guidance from Chief Counsel on technical issues. (10) This may lead to a triage approach, in which LMSB quickly resolves the issues that it has time to process, and passes the difficult issues on for Appeals and litigation. (11)

Previously, these difficult issues were candidates for National Office review, but with the increased focus on currency, reserving time for such review has become an unaffordable luxury. Although the National Office generally performs well in its role of drafting regulations, revenue rulings, and other forms of published guidance, the slow, deliberative process associated with Counsel's involvement in the published guidance process is problematic when it comes to providing examining agents with advice during an audit. The Task Force found that LMSB examiners are increasingly reluctant to request case-specific legal advice. During the early 1970s, the National Office typically received 1,400 requests for TAMs each year. From 2001 through 2005, the National Office annually received between 125 and 70 TAM requests. (12) The currency initiative appears to be a significant factor in this decline.

B. LMSB is Emphasizing Development of Industry Issues

The Task Force also identified a trend toward using the TAM process to develop the IRS position on industry-wide issues. As noted in its report:
 Today, most issues identified by examiners, particularly issues
 within the jurisdiction of LMSB, affect more than one
 taxpayer. Especially for LMSB, which has been organized by
 industry since the restructuring of the IRS in 2000, issues
 that are identified during an audit of one taxpayer are oftentimes
 raised in audits of others in that same industry. (13)

In interviews with LMSB and Chief Counsel managers, the Task Force confirmed that LMSB regularly uses the TAM process to obtain legal advice that can be applied to issues on an industry-wide basis. Often, the LMSB Technical Advisors on an issue posted these TAMs on their websites as a means of conveying to Field examiners the IRS's position on industry issues. In addition, the Task Force found that LMSB used the TAM process to obtain strategic advice from the National Office on case development. (14)

The Task Force acknowledged that LMSB use of the TAM process in this manner is improper because TAMs cannot be cited as precedent and are not intended to be used to obtain strategic case development advice. What is more, because the National Office knew that the TAMs would be used in developing industry-wide positions, it took even more time drafting TAMs and obtaining a high-level review of the analysis in the TAM. (15) This slowed down the process and made TAMs even less practical for their intended mission: providing case-specific analysis in the context of an audit.

Although the Task Force did not approve of the use of TAMs for these purposes, an important theme of the Task Force's report is to facilitate National Office involvement in developing industry-wide positions and litigation strategy through alternatives to the TAM process. The Task Force expressed concern that the National Office is becoming irrelevant to the process of providing legal and strategic advice to examining agents on how to develop their cases. Based on their interviews of IRS personnel, the Task Force determined that this is due, at least in part, to a disconnect between LMSB and the National Office on the priority of requests for general legal and strategic advice. Because of the currency initiative, LMSB needs the National Office to respond quickly, but the National Office tends to view these requests as low priority. (16) As a result, when LMSB examiners seek assistance from Counsel, they often do so through telephone calls or simply leave the technical experts at the National Office out of audit discussions.

C. New Emphasis on Chief Counsel's Role as Advocate for the Field

To become regular players in the Field's development of cases, Chief Counsel decided that the National Office should place a higher priority on its role of an advocate for the Field--at least in the context of rendering certain categories of written advice. In discussing the National Office's role before the ABA Tax Section in May, the Chief Counsel stated, "I believe that there is a clear justification for providing legal advice to our client that generally does not include taxpayer involvement." (17) He continued, "In this regard, I submit that the agency and its lawyers are behaving no differently than taxpayers and their counsel behave when they debate among themselves the strengths and weaknesses of legal positions they are considering advancing on behalf of the taxpayers." (18) Obviously, an advocate's role is very different from the role of a neutral arbitrator seeking the "right result," which National Office attorneys adopt when issuing TAMs and other written guidance such as revenue rulings. There has always been a potential conflict between the National Office's advocacy and arbitrator roles, but it may become more pronounced with the proposed changes. Optimally, the National Office will become adept at shifting between its advocate and arbitrator roles when providing case-specific advice to the Field. It may develop, however, that the Field prefers to consult with National Office attorneys acting as advocates rather than as arbitrators for TAMs.

D. Migration of Tax-Shelter Tactics into Non-Tax-Shelter Contexts

Related to the National Office's role in developing issues for litigation is LMSB's plan to develop multi-taxpayer issues through cross-functional teams similar to those that handle tax shelter transactions. Recently, the Senate Finance Committee invited Commissioner Everson to discuss the most significant compliance issues within the responsibility of LMSB. In response, Commissioner Everson identified several overarching concerns, (19) and explained LMSB's strategy for addressing specific issues. Only one of the IRS's issues was "tax shelters." (20) The Commissioner testified that the IRS has formed Issue Management Teams to coordinate the identification, development, and resolution of many of these issues. Variously described as "cross-functional" or "cross-jurisdictional," the IMTs may include representatives from LMSB, Counsel, and Appeals. Although the IMTs are relatively new, their heritage is clear: the IRS teams that worked on the identification, coordination, development, and settlement of tax shelter transactions.

In the tax-shelter context, the IRS assigned LMSB, Counsel, and Appeals representatives to coordinate the IRS's responses to listed and potentially abusive transactions. Teams were led by "issue champions," who were drawn from the LMSB Industry Directors. These tax shelter teams selected and analyzed a few paradigm cases, developed the IRS's technical position for the generic transaction, and in some cases announced a standard settlement. Although the few taxpayers that were selected as paradigm cases might have some input in the tax-shelter team's analysis, most taxpayers had no opportunity to participate. Because the teams' settlement proposals were previewed by Appeals, LMSB warned taxpayers not to expect a better deal if they took the case to Appeals. (21) Accordingly, taxpayers faced a choice between accepting the terms handed down by the tax shelter team or taking the issue to court. If the new IMT's follow similar procedures in non-shelter cases, taxpayers may feel short changed on their procedural options.

The migration of IRS tactics for addressing tax shelters into mainstream tax controversies is not new. After successfully beating back tax shelter promoters and investors in the 1980s, the Office of Chief Counsel tried to apply similar litigation tactics to more meritorious taxpayer claims, such as foreign tax credits. What followed was a drawn out series of cases in which the IRS unsuccessfully asserted billions of dollars in deficiencies only to come up largely empty handed. (22) The approach to litigation that the IRS has developed in responding to the latest wave of tax shelters also seems ill suited to mainstream tax litigation. Optimally, the new IMTs can avoid a repeat of past mistakes in selecting, developing, and resolving non-shelter issues.

The Revised Case Specific Guidance Procedures

A. Overview

To resolve the problems with the TAM process, the Task Force recommended, and the Chief Counsel adopted, three procedures for more quickly obtaining case-specific guidance from the National Office: (a) a vehicle for more resolving audit issues affecting multiple taxpayers in an industry, (b) a vehicle for the Field to obtain timely National Office advice on case-development strategy, and (c) a streamlined TAM procedure. Significantly, taxpayers may participate in only the third option: the streamlined TAM. When the National Office is involved in formulating positions on industry-wide issues, or advising the Field on case development strategy, the new procedures provide no mechanism for taxpayer participation.

B. Details on the New Case-Specific Guidance Procedures

1. The GLAM Procedure. First, the Chief Counsel has proposed providing industry-wide legal advice in a "Generic Legal Advice Memorandum." The GLAM is described as "non-taxpayer-specific advice to an industry director, service center program manager or other national program manager for the purpose of resolving audit issues that affect multiple taxpayers in a particular industry." Because of their broad applicability, GLAMs will have an executive-level signature and "will represent the Office of Chief Counsel's view of the law." (23)

The Field already has an alternative to the TAM process for resolving industry issues: the Industry Issue Resolution (IIR) program. The IIR program, which has been available since 2000, is described as a program "to work with business taxpayers, industry associations, taxpayer representatives, and other interested parties to identify frequently disputed tax issues common to a significant number of business taxpayers and to resolve these issues through published or administrative guidance." (24) In contrast to the IIR program, which includes dialogue with taxpayers and their representatives, the GLAM process is aimed specifically at helping the Field to develop the IRS's positions on industry-wide issues.

By providing a favorable forum for Field examiners, IMTs, and industry specialists to obtain legal advice for developing industry-wide issues, the Chief Counsel believes that the Field will no longer use the TAM process as a stalking horse for resolving industry issues. That should permit the National Office to issue TAMs much more quickly, which would be a positive development. The Field, however, may find the GLAM procedure to be a favorable forum for developing its point of view because taxpayers will be excluded from the process. As the Chief Counsel explained to the ABA, the National Office will be using the GLAM process to develop and strengthen "our client's arguments." Without taxpayers and their representatives raising counter arguments, and with the National Office playing the role of advocate for their "client," the Field may be able to obtain a favorable answer far more easily that if the taxpayer is on the scene raising objections and advancing counterarguments.

On the one hand, it is likely that Field examiners, IMTs, and industry specialists will take advantage of the GLAM process to obtain timely advice to use in developing their positions on industry-wide issues. On the other hand, the GLAM process may not resolve many issues. The National Office will issue GLAMs based solely on the facts and arguments presented by the examining agents, IMTs, and industry specialists. Not having their facts or arguments presented, taxpayers are unlikely to agree with the conclusions reached in the GLAM. Thus, GLAMs might be useful to the IRS in developing the legal arguments in support of multi-taxpayer issues, but they are less likely to provide a mechanism for resolving disputes on close issues.

2. Case Specific Legal Advice Procedure. The second category of advice is the Case Specific Legal Advice (Shazam). Through these memoranda, National Office or Field Counsel attorneys may provide "timely and specific strategic or case development advice related to a specific taxpayer's case." (25) As with the GLAM process, the new procedures include no mechanism for taxpayer input into the Shazam process. It is different in that the advice will address strategic, tactical, and other case development issues. The advice is to be issued within 90 days. Thus, through this vehicle, the National Office may participate in the development of a taxpayer's issue from the beginning of the examination process.

The purpose and timing of the Shazam is to help the National Office identify emerging issues and quickly address those issues in published guidance. This timing, when combined with the advocate's role that the National Office will play in the Shazam process, could make the National Office's arbitrator role more difficult. when the same issue arises later in a TAM request.

3. The Streamlined TAM Procedures. The third category of case-specific guidance--the streamlined TAM--does permit taxpayer participation. Accordingly, taxpayers may still seek to resolve disagreements with examining agents by bringing the issue to the National Office for a TAM.

Under the new streamlined TAM procedures, Chief Counsel adopted a number of changes that will become part of Rev. Proc. 2007-2 at the beginning of next year. First, the goal for issuing the TAM will be reduced to 120 days. Second, when the taxpayer and the examining agent disagree on the facts, the National Office will consider only the examining agent's version of the facts. Third, taxpayers will have just 10 days to submit information to the National Office, and taxpayers may not submit a written brief, unless invited to do so by the National Office. Finally, the National Office will deny taxpayers a conference of right, unless the taxpayer has participated in the process from the very beginning. The Task Force concluded that taxpayers were slowing up the process by not participating until after receiving notification that the National Office was tentatively adverse to the taxpayers' positions.

Given these changes, the TAM process should proceed more quickly, but it may not lead to the agreed resolution of many more issues than the GLAM and Shazam processes. This could be especially true where the National Office has already issued a GLAM or Shazam addressing the issue. Human nature suggests that National Office attorneys will be resistant to revising the positions that they adopted in prior published memoranda, even after a taxpayer is invited into the process and allowed to present arguments that the National Office previously missed or rejected because there was nobody present with an interest in pushing the taxpayer's arguments.

Anticipating this objection, the Chief Counsel sought to assure taxpayers that, when considering TAMs, National Office attorneys will not consider the earlier GLAMs and Shazams as set in stone. The TAM "process must include among its characteristics an honest and forthright effort by the Service and Counsel to reevaluate any positions formulated in either the [Shazam] or [GLAM] in light of specific arguments advanced by the taxpayers and their representatives during the TAM process." (26) Specifically, the same personnel who developed the GLAM or Shazam will be charged "to fairly and honestly consider the arguments of taxpayer counsel and, when appropriate, to reconsider the proposed position set forth in the [Shazam or GLAM] on the issue in light of those arguments." (27) Although the National Office attorneys will doubtless attempt a fair and honest reevaluation, human nature suggests that it may prove extremely difficult to turn the National Office around on an issue if it already has issued a GLAM or Shazam supporting the Field's position on the issue.

The TAM process remains an alternative to resolve complex issues, but it remains to be seen how popular TAMs will be with either the Field or taxpayers. On the one hand, the new alternatives (the GLAM and Shazam) may be more attractive to the Field because there is no need to coordinate with taxpayers. On the other hand, if the National Office has already issued a Shazam or a GLAM on an issue, or if taxpayers are concerned that the National Office will merely act as an advocate for the Field, taxpayers may decide to proceed directly to Appeals and litigation. In these circumstances, taxpayers may view the TAM process merely as an opportunity for the National Office to sharpen the Field's arguments rather than as a dispute resolution process.

There will be situations where the National Office is an appropriate forum for resolving an issue with the Field, such as when the Field is advancing a patently improper technical argument but refuses to change its position. Even in such situations, the taxpayer should monitor whether the National Office is slipping into the role of advocate for the Field rather than impartial arbitrator of the applicable law. Unfortunately, there is neither a clear standard for determining when the National Office is wearing the wrong hat nor an easy remedy.

Implications for CIC Taxpayers

The new case-specific guidance procedures will enable the National Office to provide legal advice to examining agents within the compressed audit cycle times mandated by the currency initiative. That should encourage examining agents to involve the National Office in legal issues that arise during the audit, which was the stated purpose of the new guidance procedures. The new procedures, however, often achieve these time savings by restricting the adversarial process. This aspect of the changes should be monitored. Without input from the affected taxpayers, taxpayers may encounter more IRS positions that provide an unbalanced view of the law and facts. This is particularly problematic given the IRS's plans to develop more multi-taxpayer issues through IMTs, which may restrict the opportunities for taxpayers to obtain independent review by their Appeals Officers. The IRS recognizes that it is more efficient to resolve issues at the lowest level possible, but its desire to shorten the examination process, use Chief Counsel as the Field's advocate, and more widely deploy IMTs may ultimately lead to more unagreed cases that proceed to litigation. (28)

Taxpayers need to adapt to the changed environment now confronting them. Taxpayers should try to learn whether the IRS has assembled an IMT with respect to any of its issues and what stage of issue development the IMT has reached. In the tax shelter context, only the first few taxpayers with "paradigm cases" had an opportunity to provide meaningful input into the IRS's position. Similarly, taxpayers should try to keep track of whether there are any GLAMs, Shazams, and TAMS that already have issued or are in process, because these factors may limit the utility of seeking National Office review. Stated bluntly, taxpayers should be aware that the National Office may find it difficult to evaluate an issue fairly if the National Office has already adopted a pro-IRS position in a GLAM or Shazam.

If a taxpayer and Field examiner agree to pursue a TAM, adhering to the new time frame will be a challenge. Because factual disputes are resolved in favor of the Field, the taxpayer must be prepared with witnesses, documents, and briefings to convince the examiners of the correct facts. The taxpayer also should have a well-developed legal argument ready. If the taxpayer is dilatory in submitting evidence of the facts, it may be deemed not to have participated up front. If it simply cannot agree with the Field agent, IMT, or industry specialist on the facts, it risks being excluded from the National Office process.

Finally, as a consequence of recent tax shelter cases, the IRS has become more comfortable announcing its view of an issue and the proposed resolution for all affected taxpayers. The agency does this fully expecting that, while taxpayers and their representatives may grouse, many tax shelter investors will fall in line. For those who do not accept the IRS's view, the agency often takes a hard line, limiting the opportunity for substantive review of the IRS position at Appeals, imposing penalties, and barring any "taxpayer favorable" settlement once a case is in court. This approach worked fairly well when the IRS concentrated on widely-marketed, off-the-shelf tax shelters that the IRS deemed abusive. Applying an advocate's one-sided guidance and case development tactics in the context of mainstream tax examinations, however, has the potential to lead to more litigation, not more Field-level issue resolution. Taxpayers should consider these factors when deciding whether to pursue a TAM request, as well as the possibility that the National Office will take up only Exam's version of the facts because of a factual dispute with the Field.

Standards of Conduct

Since the Mission, Principle, and Purposes of TEI can be achieved only by the observance on the part of its members of the highest standards of professional conduct, the Board of Directors adopted the following:

Tax Executives Institute, Inc., recognizes the following as the standards of conduct for each member in administering tax affairs for which he or she is responsible:

* The member accepts taxes as the cost of civilization and accepts the laws imposing taxes as the mechanism for distributing that cost among businesses and individuals. The member will comply with those laws, whether or not agreeing with them.

* The member recognizes an obligation to minimize company tax liability, within the bounds of the law and to the extent consistent with policies or objectives of the company, having due regard for the interests of society in sound tax policy, and will advise and support action to obtain that objective, to the best of the member's ability.

* The member recognizes an obligation to make an affirmative contribution to the sound administration of tax laws, and to the adoption of sound tax legislation, by cooperation and consultation with the persons charged with those functions, having due regard for the interests of society, as well as the interest of the company and its employees.

* The member accepts each Government representative as a person devoted to fulfilling the obligation to collect revenue honorably in accordance with law. The member will deal with the representatives on that basis, and will take occasion with others to uphold this view of Government representatives. In case of any deviation of a representative from that standard, the member will present the pertinent facts to the authorities authorized to take action with respect to the deviation.

* The member will present the facts required in tax returns and all the facts pertinent to the resolution of questions at issue with representatives of the government imposing the tax.

* The member will employ assistants and outside representatives upon the basis of their technical competence, always having due regard for the highest standards of professional ethics.

* The members will at all times recognize a duty of professionalism and will not use TEI membership to solicit business or sell products to other members.

(1.) Members of the Task Force were Lon Smith, Associate Chief Counsel (Financial Institutions & Products); William Alexander, Associate Chief Counsel (Corporate); Michael Corrado, Deputy Area Counsel (LMSB); Richard Fultz, Special Counsel to the Associate Chief Counsel (International); Andrew Keyso, Special Counsel to the Chief Counsel; Lisa Mojiri-Azad, Senior Technician Reviewer (Tax Exempt & Government Entities); Nancy Roman, Deputy Area Counsel (SBSE); Curt Wilson, Assistant Chief Counsel (Administrative Provisions & Judicial Practice); and Donna Marie Young, Special Counsel to the Associate Chief Counsel (Passthroughs & Special Industries). See Report of the Case Specific Advice Task Force, reprinted in Tax Core--IRS Documents, Chief Counsel Notices (May 8, 2006).

(2.) See Report of the Case Specific Advice Task Force, reprinted in Tax Core--IRS Documents, Chief Counsel Notices (May 8, 2006).

(3.) See Chief Counsel Notice CC-2006-13 on Incorporating Into Procedures Recommendations of the Case Specific Advice Task Force (May 5, 2006). The Case Specific Legal Advice Memorandum has become know as a "Shazam" because, as discussed in the text that follows, it will be issued quickly based solely on the facts and arguments presented by examining agents.

(4.) See Written Testimony of Commissioner of Internal Revenue Mark Everson Before the Senate Committee on Finance on Compliance Concerns Relative to Large and Mid-Sized Businesses (June 13, 2006).

(5.) See Korb Discusses IRS Legal Processes at ABA Tax Section Meeting, 2006 TNT 88-76, at 2 (May 5, 2006).

(6.) See Rev. Proc. 2003-40, 2003-1 C.B. 1044 (June 3, 2003).

(7.) See I.R. News Release 2002-133 (Dec. 4, 2002).

(8.) See Rev. Proc. 2005-12, 2005-12 I.R.B. 311 (Dec. 22, 2004).

(9.) See Ann. 2005-87, 2005-50 I.R.B. 1144 (Dec. 8, 2005).

(10.) Indeed, in describing the CAP program, LMSB Commissioner Deborah Nolan identified as a challenge ensuring that IRS technical resources are available when needed and maintaining open lines of communications with the National Office. See Deborah M. Nolan, "LMSB's Compliance Assurance Program (CAP): One Year Later," 58 THE TAX EXECUTIVE 26, 32 (2006).

(11.) For example, in an informal poll by Tax Executives Institute last year, several members reported that their LMSB team mangers had sent complex issues on to Appeals in an effort to meet deadlines for closing cases. See Statement of Timothy J. McCormally on Behalf of Tax Executives Institute, Inc. Before the IRS Oversight Board (Feb. 1, 2005); see also Crystal Tandon, "Nolan Discusses LMSB Compliance Initiatives," TAX Novas TODAY (Jun. 8, 2005) (Nolan addressing LMSB's efforts to measure whether LMSB teams are pushing tough issues off to Appeals and reporting that a clear message has been sent to agents and managers that they should take as much time as necessary in pursuing an issue "to do the right thing.")

(12.) Korb Discusses IRS Legal Processes at ABA Tax Section Meeting, 2006 TNT 88-76 at 3 (May 5, 2006).

(13.) Task Force Report at 4.

(14.) Id.

(15.) Id.

(16.) Id. at 5.

(17.) Korb Discusses IRS Legal Processes at ABA Tax Section Meeting, 2006 TNT 88-76, at 5 (May 5, 2006).

(18.) Id. at 6.

(19.) These were globalization, complexity of the tax laws, complexity of transactions, and book-tax differences. See Letter of IRS Commissioner Mark Everson to Senator Charles Grassley (May 19, 2006), reprinted in 2006 TNT 114-21, at 4.

(20.) These were (i) transfers of intangibles/cost sharing, (ii) abusive foreign tax credit transactions, (iii) abusive hybrid instrument transactions, (iv) transfer pricing, (v) R&E credit claims, (vi) universal service funds, (vii) mixed service costs, (viii) the domestic manufacturing deduction under section 199, (ix) repatriations under section 965, (x) executive compensation under section 409A, and (xi) tax shelters. See id., reprinted at 2006 TNT 114-21, at 4-9.

(21.) See, e.g., Ann. 2005-80, 2005-46 IRB 967 (Oct. 27, 2005) (settlement initiative for multiple shelters warns taxpayers not to expect a better settlement at Appeals); S. Stratton and C. Tandon, IRS Makes Settlement Offer to SC2 Investors, 2005 TNT 66-1 (April 7, 2005) (Exam's offer to settle SC2 transactions includes statement that taxpayers should not expect a better settlement at Appeals); see also Ann. 2004-46, 2004-21 I.R.B. 964 (announcing that Appeals consideration will be unavailable for Son of Boss transactions).

(22.) See, e.g., Exxon Corp. v. Commissioner, 113 T.C. 338 (1999); Amoco Corp. v. Commissioner, T.C. Memo. 1996-159; Phillips Petroleum Co. v. Commissioner, 104 T.C. 256 (1995); Xerox Corp. v. United States, 41 F.3d 647 (Fed. Cir. 1994).

(23.) See Korb Describes IRS Legal Processes at ABA Tax Section Meeting, 2006 TNT 88-76 at 5. "Executive-level signature" includes the Chief Counsel, as well as an Associate, Deputy Associate, or Assistant Chief Counsel.

(24.) See Internal Revenue Manual Chapter 7.40.1.

(25.) Korb Describes IRS Legal Processes at ABA Tax Section Meeting, 2006 TNT 88-76, at 5.

(26.) Id.

(27.) Id.

(28.) The IRS has introduced several new mechanisms to achieve early settlements, including PFAs, the CAP program, and Fast Track Appeals. Although these programs have been successful in achieving settlements in many cases, they may be of limited utility where an IMT, with help from the National Office, has already developed a strongly pro-IRS position on an issue.

DAVID B. BLAIR is a Member of Miller & Chevalier Chartered in Washington, D.C., where he focuses on tax controversies and litigation. He currently chairs the Tax Section of the Federal Bar Association and is an adjunct professor at the Georgetown University Law Center. Before joining Miller & Chevalier, Mr. Blair was a trial attorney with the Tax Division of the U.S. Department of Justice and clerked for the Hon. Frank M. Johnson, Jr. of the United States Court of Appeals for the Eleventh Circuit.

DWIGHT N. MERSEREAU is a Counsel with the Washington, D.C., office of Miller & Chevalier Chartered. His practice focuses on federal income tax issues, and he has assisted clients in resolving issues on examination, before appeals, and in the Tax Court. An adjunct professor at Georgetown University Law Center, Mr. Mersereau previously was an attorney-adviser in the IRS National Office and a trial attorney with the U.S. Navy, Judge Advocate General Corps. The authors thank their colleagues, Lawrence B. Gibbs, Philip L. Mann, and Robert L. Moore, II, for reviewing earlier drafts of this article. Author may be reached at and
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Title Annotation:Large and Mid-Size Business Division
Author:Mersereau, Dwight N.
Publication:Tax Executive
Date:Jul 1, 2006
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