West Michigan TEI / IRS Meeting, May 12, 2011

1. West Michigan TEI  / IRS Meeting, May 12, 2011 By: Fred Gavin, Appeals Team Case Leader, Detroit Appeals Office (313) 628-3005 Fred.l.gavin@irs.gov 477 Michigan Avenue, Room 565, Stop 33 Detroit, MI 48226-2523 _______________________________________ Linda G. Colemon FTS Program Manager - East Appeals Team Case Leader 1835 Assembly Street, Rm 508, MDP 43, Columbia, SC 29201  Office: 803.253.3739 Fax: 803.253.3749   Email: Linda.G.Colemon@irs.gov

2. What is Fast Track Settlement (FTS)? Fast Track Settlement is a collaborative alternative dispute resolution process that utilizes mediation techniques to focus issues and lead the parties to self-determine the outcome of the dispute.

3. FTS Program Objectives • Increase issue resolution at lowest level • Use Appeals tools in LB&I • Decrease overall time from return filing to ultimate resolution • Meet needs of LB&I • Reduce burden for the Taxpayer and Service

4. Fast Track Settlement – LB&I

5. LB&I Fast Track Settlement Application Instructions http://lmsb.irs.gov/hq/pqa/downloads_FTS/FTSApplicationInstructions.asp Fast Track Settlement Application Instructions • Please contact the Appeals FTS Program Managers (East or West) or the LB&I FTS Program Coordinator,  Monica B. Jones if you have questions regarding the eligibility of an issue for Fast Track Settlement. In an effort to expedite the Fast Track Settlement (FTS) application process, Appeals and LB&I have established the FTS mailbox. You should submit the FTS Application package electronicallyvia the FTS mailbox.  However, if your application package is voluminous, please contact the appropriate FTS Appeals Program Manager (East or West) to make other arrangements for submission. The FTS application should be submitted along with the following documents: • FTS Application (Form 14017 - save in .pdf format) Please ensure the bottom portion of the application form is filled out. • Issue Statement • NOPA (Form 5701 and 886-A) • List of Participants and titles (LB&I and Taxpayer) • Taxpayer's written response (a formal protest is not required - save in .pdf format) • Form 2848 (if applicable - save in .pdf format) • Please scan and save documents in .pdf format. Only one application should be submitted for each case (please do not separate signatures on separate applications). • Please make sure the Taxpayer or Taxpayer’s Representative, Team Manager, and Territory Manager (TM) have signed the application before you submit the package. 

6. Role of Appeals FTS Program Manager • Responsible for Managing the Fast Track Program • Serve all Stakeholders • Screen Applications • Outreach Presentations • Fast Track Reports

7. Overview - LB&I/Appeals FTS Process START • LB&I will explain the Fast Track Settlement process to the taxpayer and determine whether the case qualifies for Fast Track Settlement. IRM 4.51.4.4.2(1) • Is the case qualified for Fast Track Settlement? NO • Any request for FTS denied to the taxpayer by LB&I Team Manager requires concurrence of the LB&I Territory Manager. The Team Manager forwards a copy of any denied request along with a brief statement as to the reasons for denial to the LB&I Territory Manager requesting concurrence. IRM 4.51.4.4.2(5)&(6) • Does the Territory Manager concur? YES • The standard examination procedures and closing process are followed. END

8. Overview - LB&I/Appeals FTS Process START • LB&I determines the case qualified for Fast Track Settlement • When the Application for Fast Track Settlement, Form 14017 is ready to submit and is signed by the appropriate LB&I Territory Manager, the referring LB&I Team Manager sends the application to the Appeals Fast Track Program Manager using the Fast Track Mailbox. *AP ATCL FTS. IRM 8.26.1.9(1). • Within three business days of receipt, the Appeals FTS Program Manager reviews the Application to determine if eligible. YES • The Appeals FTS Program manager signs the Application and forwards it to the local ATM for concurrence and assignment. IRM 8.26.1.9.1 • Does ATM concur with acceptance? YES

9. Overview - LB&I/Appeals FTS Process • If the ATM concurs with the acceptance of the application, he/she signs the application and sends to the Appeals FTS Program Manager. • Upon acceptance and within 7 days of the receipt of the Application, the ATM will assign the case to an ATCL or AO. The ATM will send the application and related materials to the ATCL/AO. IRM 8.26.1.11(1). • If the Appeals FTS Program Manager or ATM determines that a case does not qualify for LB&I FTS, the Appeals FTS Program Manager discusses the reason(s) for rejection with the LB&I Territory Manager and within 10 days of the receipt of the application, notifies both the taxpayer and the LB&I Team Manager of the reason(s) for the denial and the process ends. IRM 8.26.1.9.2(4)&(5) • The decision not to approve an application for the FTS program is final and not subject to administrative appeal or judicial review. Rev Proc 2003-40, Section 4 .02 DENIAL

10. Overview - LB&I/Appeals FTS Process • Within 10 business days of assignment, the ATCL/AO will call the taxpayer and the LB&I Team Manager to start the FTS session. The contact will be followed up with an FTS Acknowledgement Letter Form 14000 and a copy of the FTS Session Report. IRM 8.26.1.5.2(1) & 8.26.1.12.1 • The ATCL/AO will schedule Planning phone conferences and Settlement sessions as needed. The ATCL/AO solicits signatures of the taxpayer and the LB&I Team Manager at the conclusion of the session, whether or not agreed or unagreed. Signing the Session Report does not constitute a final settlement but the session report should be modified for TEFRA partnerships or potential Joint Committee cases. Working FTS Case

11. Overview - LB&I/Appeals FTS Process • Except with the concurrence of the LB&I Territory Manager and the Appeals FTS Program manager, the FTS process is limited to 120 calendar days. After a reasonable time, but at least before the 120 calendar days, the ATCL/AO should consider whether any further benefit will be derived from the process. IRM 8.26.1.9(5) • Send an e-mail to the LB&I Territory Manager and the Appeals FTS Program Manager seeking concurrence to keep the case open past the 120 days. • Consult with the Appeals FTS Program Manager before making the final decision to terminate and then send termination letter. IRM 8.26.1.12.5(1) Progress No Progress

12. Overview - LB&I/Appeals FTS Process • The ATCL/AO may ultimately make a recommendation regarding the settlement of any or all issues (both factual and legal). Neither party is required to accept a proposal. IRM 8.26.1.13(2) • On the day agreement is reached, the terms and dollar adjustments of the resolved issues are documented on the FT Session Report. All parties (Appeals, LB&I and the taxpayer) sign-off on the FT Session Report. For issues settled using Appeals settlement authority, Appeals prepares a brief ACM and a closing agreement. For issues settled using the authority of the LB&I Team Manager rather than Appeals settlement authority, Appeals does not prepare an ACM. No ACM is required for issues not resolved in the FTS session. IRM 8.26.1.17.2 FTS Session

13. Overview - LB&I/Appeals FTS Process • When the LB&I FTS process is unsuccessful in resolving an issue (including withdrawn issues), Appeals sends a letter to both the taxpayer and LB&I identifying who participated in the process, listing the issues not resolved, and explaining the taxpayer’s rights to appeal. The administrative file consisting of the Form 5701 with the taxpayer’s written response, any FTS workpapers prepared by LB&I and Form 5402 are provided to LB&I for inclusion in the case file. No Appeals Case Memorandum (ACM) is prepared for unresolved issues. IRM 8.26.1.15 (2) &(3). • When the LB&I FTS process is successful and is a potential Joint Committee case, LB&I begins preparing the tax computation and the Joint Committee Report. Appeals explains to the taxpayer that the agreement is treated as final for computation purposes, but it is subject to review by the Congressional Joint Committee on Taxation. IRM 8.26.1.17.4 (5) • Appeals prepares the closing agreement on settled issues, and solicits the taxpayer’s signature on the closing agreement, but the closing agreement is not signed by Appeals until the Joint Committee clearance letter is received. IRM 8.26.1.17.4 (6)

14. Overview - LB&I/Appeals FTS Process • When the LB&I FTS process is successful and is not a potential Joint Committee case, Appeals sends the taxpayer the closing agreement with a closing letter containing the following text: “The agreement we reached on your LB&I FTS case has been approved and we will return the file to LB&I so that they may complete processing of your case. The enclosed copy of the accepted closing agreement is for your records. The LB&I team will compute the tax and give you a report. If you have any questions, please call me at the phone number shown above.” IRM 8.26.1.17.1 (2)

15. Overview - LB&I/Appeals FTS Process The “LB&I FTS Closing Package” is sent to the LB&I Manager and consists of: a. Form 5402 b. ACM (if required) c. Agreement Forms (Form 870-AD or Closing Agreement if required) d. FT Session Report(s) Form 14000 e. Agenda(s) f. All correspondence received from and sent to the taxpayer/representative IRM 8.26.1.17.5 (2) Closing FTS Case

16. Common Barriers in the FTS Process Getting the Fast Track Session Scheduled • Getting the parties to agree on a time and place • Getting the right people to the session (decision-makers) Lack of understanding of the negotiation process • Doesn’t want to be there • Insists on deciding right or wrong rather than a settlement • Won’t discuss differences and agreements Failure of proper preparation • Facts not fully understood • New facts presented • No agreement as to what the dispute is

17. Common Barriers to Settlements Failure of Effective Communication • Not considering the other sides frame of reference • Inability to express thoughts clearly • Defensiveness • Negative feelings toward the other side • Hidden agendas • Poor listening

18. Common Barriers to Settlements Outside Pressures • Need to justify a position to a boss • Wanting to set an example for future • Wanting to look good to a superior Different Motivations • Different attitudes toward the desirability of a prompt settlement • Different attitudes towards risks • Different perceptions of alternatives

19. Common Barriers to Settlements Extrinsic Factors • Link to other disputes • Negative feelings for other party • Desire to punish or embarrass rather than cooperate • Fear of unknown or future Unrealistic Expectations • Wants more than just a resolution of the issue • Wants something from a party that is not present • Wants something that a party cannot control or give

20. Role of Appeals FTS Mediator Session Planning • Make sure the parties understand the process • Make sure the parties agree as to what is at issue • Make sure the decision-makers are in the room to the extent possible Session Management • Make sure the facilities are conducive to the session and not distracting • Make sure to set the ground rules and keep the discussion civil • Make sure to give each side time to talk without interruption • Keep discussions on track and don’t let them become personal

21. Role of Appeals FTS Mediator Help the Parties to Analyze and Negotiate • Point out items the parties agree to • Listen for “hidden concerns” and get the parties to recognize them • Ask questions to make sure one side is hearing the other • Help the parties prioritize their own needs and desires • Avoid jumping to conclusions before the parties have finished • Remind the parties of reality and what are reasonable expectations

22. Role of Appeals FTS Mediator Overcoming Impasse • Hold sidebar meetings with only the principle negotiators • Ask them to explain why the other party should accept their proposal • Ask them “what if” scenarios about what proposal they would accept • Ask them to put themselves in the other’s shoes and explain how they would solve the other party’s needs • Adjourn the process and allow for a cooling off period

23. Tips for Success • Understanding the FTS Process • Commitment to 120 Day Time Frame • Effective Communication and Transparency • Proper Session Preparation • Understanding the FTS Session Negotiation Process • Removal of Common Barriers

24. Questions Open Forum