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Thursday, September 20, 2007

ABA Tax Section Releases Survey Report on Independence of IRS Appeals

The ABA Tax Section has released Survey Report on Independence of IRS Appeals.  Here is part of the Executive Summary:

The ABA Section of Taxation decided to survey its membership to determine the members’ experience relating to the perceived independence of the IRS’s Appeals Division. In that regard, a seven-page survey instrument was developed by the Committee on Administrative Practice and a “Blue Ribbon” panel of members to solicit opinions from Tax Section members who have had experience with Appeals in the recent past regarding the independence of the IRS Appeals process from the examination, collection, and the enforcement functions of the IRS. Over 560 Section members responded to the initial evaluation questions in the survey, and they provided over 70 pages of comments about the positive and negative aspects of their recent experiences with IRS Appeals.

One component of the survey presented the respondents with the opportunity to evaluate a series of general statements about the Appeals process. The key responses are summarized as follows:

  • On a positive note, 73.1% of the survey respondents believe that Appeals Officers are generally fair.
  • Three quarters of the respondents perceive Appeals Officers to be generally well trained in tax law and procedure.
  • About 73.5% of the tax practitioners offering an opinion expressed their belief that Appeals Officers are generally well trained in how to interact with taxpayers and representatives.

There is agreement across a substantial component of the respondent pool with regard to perception that certain recent changes in the structure and procedures of IRS Appeals have had a negative effect on the independence or appearance of independence of Appeals. The following key responses are noteworthy:

  • Almost 80% of the respondents expressing an opinion believe that Appeals involvement in recent IRS tax shelter settlement initiatives, such as the Executive Stock Option tax shelter, makes Appeals less independent.
  • Almost two thirds think that the independence of Appeals is reduced when protests are sent first to examination or ACS before going to Appeals.
  • About 62% believe that Appeals Officers who are located at the same physical location as compliance personnel are less independent than Appeals Officers who are located at a different (non-co-located) offices.
  • Over half of the respondents expressing an opinion on these issues think that Appeals Officers who are located at campuses (formerly “service centers”) are less independent than local Appeals Officers, and that Appeals involvement in recent alternative dispute resolution processes such as the Fast Track Mediation or Fast Track Settlement, makes Appeals less independent.

Interestingly, with regard to the Fast Track programs, about three quarters of the relatively small number of tax practitioners who have actually participated in either the Mediation or Settlement program reported their perception that these are worthwhile programs. This suggests that consideration should be given to making these programs more accessible.

The survey tested perceptions about the Appeals process in the context of four different types of matters -- examination appeals, collection due process (“CDP”) hearings, appeals from offers in compromise (“OIC”) or non-CDP cases, and innocent spouse appeals. Interestingly, there were differences in perceptions across these different case types. For example, with regard to evaluations of whether Appeals exercised independence generally in these matters, 40.1% of the tax practitioners with experience in appeals from OICs or non-CDP cases report a perception that Appeals did not exercise independence, compared to 33.9% of those who had handled CDP matters in the two years before the survey, 30% with experience with appeals from examination, and finally, only 17% of those who had handled at least one innocent spouse case in the two years prior to the survey. It is interesting to note that these findings generally mirror those described in the Report of the Treasury Inspector General for Tax Administration issued in 2005.2 In response to the question, “how satisfied were you with the independence Appeals had from the people who proposed adjustments,” about 60% of the respondents reported some level of satisfaction.

The many comments provided by the survey respondents illuminated the reasons for their positive or negative perceptions of their recent experiences with Appeals. Most of the comments, both positive and negative, focus on Appeals personnel issues. Positive comments cite the willingness of Appeals personnel to listen to the arguments presented, the level of preparation exhibited by the Appeals Officers, and the ability of Appeals personnel to reach conclusions that recognize the elements of each individual case. The negative comments touch upon concerns with Appeals Officers who seem unable to reach a decision without consulting the IRS National Office; the influence of industry specialists or other experts to the detriment of the independence of the Appeals Officers; perceptions that Appeals Officers who come up through the ranks of revenue officers or examination agents bring with them the attitudes of their previous positions rather than attitudes more appropriate to an appellate official; and that competent, experienced Appeals Officers are retiring, ceding the arena to individuals who are not as well trained. There are substantial concerns about delay in resolution caused by lost files, heavy caseloads, and lack of timely communication.

The positive comments regarding location turn upon the benefits of ease of access to local Appeals Officers. The negative comments involve concerns about having to work with Appeals Officers in distant locations, who in addition to not being readily accessible, are not aware of local circumstances. The comments regarding location focus less on independence issues and more on concerns about access and inconvenience.

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