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Taxpayer involvement in competent authority process.

On April 19, 1994, Tax Executives Institute submitted the following comments to the Internal Reven forth recommendations for involving taxpayers in the competent authority process. The comments, whic letter from TEI President Ralph Weiland to James A. Dougherty, IRS National Director of Appeals, sup Institute's comments on Announcement 93-144, which were reprinted in the March-April 1994 issue of T The Institute's comments were prepared under the aegis of its International Tax Committee, whose cha Ingersoll-Rand Company.

This letter responds to your request for Tax Executives Institute's recommendations on involving taxpayers in the proposed Competent Authority procedure set forth in Announcement 93-144. The Announcement provides a mechanism for the involvement of Appeals in the Competent Authority process. The proposed procedure contemplates changes in Rev. Proc. 91-23, the terms of which now strongly encourages taxpayers to complete the Appeals process before requesting Competent Authority assistance.

The proposed procedure calls for Appeals to consult with the taxpayer and to assist the Competent Authority in developing the U.S. negotiating position. As TEI testified at the IRS's January hearing on Announcement 93-144, we applaud the IRS for taking steps to improve taxpayer access to Competent Authority and to enhance the overall efficiency of the process. By taking advantage of the procedure, taxpayers can become more actively involved in a process where they might otherwise get caught in the middle between competing governmental claims. This letter discusses the guidelines for obtaining taxpayers' assistance in the development of the U.S. negotiating position in conjunction with the U.S. Competent Authority and Appeals.

A. Taxpayer Involvement in the Process. TEI agrees with the procedure's premise that Appeals should be involved in the development of the U.S. Competent Authority's position where the Announcement 93-144 mechanism is used. The proposed procedure will enhance the efficiency of the process, however, only if the U.S. negotiating position is developed with the assistance of the taxpayer, especially with respect to the facts of the case.

The Institute believes that it would be counterproductive to impose rigid requirements concerning the involvement of the taxpayer in the Competent Authority process. Rather, we recommend that the IRS issue an announcement calling for such involvement in a flexible and reasonable manner and focusing on the need for such involvement. The announcement should provide that Appeals will consult with the taxpayer in developing the relevant facts and will keep the taxpayer apprised as the U.S. negotiating position is developed. One means of keeping the taxpayer apprised of the negotiation would be to provide that Appeals will meet with the taxpayer as soon as practicable after Appeals' involvement has been requested.

The proposed procedure could also provide that the taxpayer be afforded an opportunity to review and comment on any proposed negotiating position and could require the taxpayer to respond in a reasonable manner to requests for additional data.

B. Post-Competent Authority Procedures. The proposed procedure should therefore provide that if a competent authority settlement is not reached, taxpayers retain their rights to negotiate a settlement with Appeals. We recognize that in these cases, however, the U.S. negotiating position may well be the starting point for negotiations at the Appeals level, but believe that Appeals should not lock itself in to this position.

We appreciate this opportunity to supplement our views on the proposed Competent Authority procedure set forth in Announcement 93-144. For further information, please do not hesitate to call Lisa Norton, Chair of TEI's International Tax Committee, at (201) 573-3200, or Mary Lou Fahey of the Institute's professional staff at (202) 638-5601.
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Title Annotation:Tax Executives Institute
Publication:Tax Executive
Date:May 1, 1994
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