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Tax Talk Blog for Tax Pros

Welcome to TaxBlawg, a blog resource from Chamberlain Hrdlicka for news and analysis of current legal issues facing tax practitioners. Although blawg.com identifies nearly 1,400 active “blawgs,” including 20+ blawgs related to taxation and estate planning, the needs of tax professionals have received surprisingly little attention.

Tax practitioners have previously lacked a dedicated resource to call their own. For those intrepid souls, we offer TaxBlawg, a forum of tax talk for tax pros.

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Update on IRS Procedures for Designating Federal Tax Cases For Litigation

On August 24, the IRS issued an internal memorandum that impacts when taxpayers may obtain IRS Appeals Conferences if their issues are designated for litigation.  As background, the IRS has a long-standing policy of permitting taxpayers an administrative-level review of audit adjustments by referring matters to its Office of Appeals.  For decades, this review process was discretionary for the IRS to offer.  It was a matter of administrative grace.  No longer.

Enter The Taxpayer First Act

In July 2019, Congress enacted The Taxpayer First Act which codified the Appeals Office (with a new name, the “Internal Revenue Service Independent Office of Appeals”) and established several broad parameters on the new office’s remit. 

As a general rule, the Act affords taxpayers a statutory right to have an audit adjustment reviewed by the new Appeals Office.  The standards for resolving issues in Appeals essentially remains the same.  Under both the new office and its predecessor, based on the hazards that the IRS and taxpayer each would face if the case went to litigation, and on a fair and impartial evaluation of those hazards.

The 2019 Act, however, made two exception to the right to an Appeals Conference: (1) frivolous positions, and (2) cases designated for litigation.  The Act further required that a taxpayer receive an opportunity to contest the denial of an Appeals Conference. 

The August 24 IRS Memo

As interim guidance in response to the 2019 Act, the IRS issued an internal memorandum on August 24, directly principally to internal procedures for designating cases for litigation.  The process typically begins at the examination level and must traverse several layers of review and ultimately be approved by the IRS Chief Counsel.  The memo emphasized that “designated” status of cases should remain infrequent. Significantly, the memo then provides taxpayers with the opportunity to obtain review of the designation and make their case for why the IRS should not designate their case for litigation. 

At least as important, the memo specifies that, in general, the fact that a case is designated for litigation does not preclude the Appeals Office from considering and settling the same issue in other cases within its jurisdiction.  As the IRS has moved to campaign-style issue identification techniques, the IRS is focusing more and more on tax planning techniques marketed to large groups of taxpayers and on issues that affect broad segments of the population.  The IRS memo is potentially welcome news that taxpayers will be able to resolve matters at IRS Appeals, even if the same general issue has been designated for litigation in a case involving another taxpayer.

Chamberlain Hrdlicka regularly represents clients in cases before the Office of Appeals, and has substantial experience with issues that affect large groups of taxpayers.

  • Peter A. Lowy

    Peter A. Lowy, a shareholder in Chamberlain Hrdlicka’s Houston office, is best known for his tax controversy work and deep experience in the energy sector. He also advises corporations and other taxpayers in a broad spectrum of ...