1. Tax Executives Institute Minnesota Chapter TEI/IRS Liaison Meeting
May 19, 2015
Jessica Samuel, Territory Manager, RFTH

2. Introduction Jessica R. Samuel Territory Manager
1550 American Blvd East
Bloomington, MN 55425
(651) 2

3. Agenda Professional Examinations
Principles of Sound Tax Administration
IDR Enforcement Process
Issue Resolution Tools
Pre-Filing Agreements (PFA)
Fast Track Settlement (FTS)
Industry Issue Resolution (IIR)
Compliance Assurance Program (CAP)
LB&I Exam Process
CIC Centralized Classification Process

4. Professional Examinations
Principles of Sound Tax Administration
Accountability
Professionalism
Discipline
Transparency

5. Professional Examinations
Transparency Throughout Entire Audit Process
IRS must ensure that the taxpayers know throughout audit
the issues the examiner is considering,
why the examiner is raising the issue,
the legal argument the examiner is relying upon, and
the examiner’s views of the taxpayer’s legal arguments.
Taxpayers must fully participate in all stages of examination
Planning Phase
Timely presentation of all relevant facts and arguments with respect to each issue during the examination. 5

6. Professional Examinations
IDR Enforcement Process
Make IDR Process Efficient and Transparent
LB&I examiners and specialists trained
Meaningful engagement between IRS and Taxpayer
Mandatory Process – No exceptions 6

7. Professional Examinations
Requirements for Issuing IDRs
IRS and taxpayer to discuss a draft of the IDR and its contents prior to issuance
IDRs are to be issue focused, clear and concise
Issue IDRs with clear, agreed-upon timeframes for response 7

8. Professional Examinations
IDR Enforcement Process
Applies to IDRs issued in compliance with requirements for issuing IDRs
Mandatory process involves three graduated steps:
Delinquency Notice
Pre-Summons Letter
Summons 8

9. Professional Examinations
IDR Enforcement Process
Delinquency Notice (Letter 5077)
Discussed with the taxpayer (Tax Manager) and signed by team manager
Pre Summons Letter (Letter 5078)
Discuss lack of complete response to Notice with the exam team (specialist, team and territory management, counsel, DFO)
Territory Manager must sign and discuss Pre-Summons Letter with the taxpayer (Tax Director) 9

10. Professional Examinations
IDR Enforcement Process
Summons
Discuss lack of complete response to Letter with taxpayer (VP of Tax)
Includes Team Manager, Specialist Manager, Territory Managers, DFOs and IRS Counsel
Summons prepared and issuance coordinated with IRS Counsel 10

11. Issue Resolution Tools
Pre-Filing Agreements (PFA)
Fast Track Settlement (FTS)
Industry Issue Resolution (IIR)
Compliance Assurance Program (CAP)

12. Pre-Filing Agreements (PFA)
Beneficial way to reach agreement on a issue in a cooperative environment before the return is filed.
Revenue Procedure provides the program guidelines.
User fee — $50,000 (Due only if the issue is accepted).
Taxpayers overall satisfaction is 4.7 out of 5.

13. Fast Track Settlement (FTS)
Key points about FTS include the following:
The FTS program is jointly administered by the LB&I Division and the Office of Appeals.
LB&I agents and taxpayers work together to resolve outstanding issues while in LB&I’s jurisdiction.
The FTS process should be completed in 120 days.
Not appropriate for all cases, agents strongly encouraged to consider Fast Track on ‘unagreed’ issues
The taxpayer retains all standard appeal rights regarding any unresolved issues remaining at the time of termination

14. Fast Track Settlement (FTS)
Appropriate resolution tool when:
Issue cannot be resolved at exam level
Factual and Legal Issues
Taxpayer and IRS agree to utilize the program
Hazards of Litigation exist
Since program inception through March 2014
Accepted 984 cases
Resolution rate over 80%

15. IIR Program – Rev Proc 2003-36 The program goals are to:
Address frequently disputed or burdensome business tax issues that affect a significant number of taxpayers.
Provide clear guidance to reduce the time and resources associated with resolving issues during tax examinations.
The IIR process includes:
Issue Submission and Selection
Planning, Analysis and Development
Resolution and Guidance

16. IIR Submission
Taxpayers, associations, and others can submit an issue anytime
No required format, but should include
Issue statement and description of why the issue is appropriate for the program
Explanation of the need for guidance and estimated number of taxpayers impacted
Name and phone number of a contact person
May include a recommendation as to how the issue could be resolved.
Refer to Rev. Proc for IIR application process

17. Issues Appropriate for IIR
Issue should have two or more of the following attributes:
Uncertain tax treatment of common factual situation,
Uncertainty results in frequent, repetitive exam of the same issue,
Uncertainty results in taxpayer burden,
Significant and impacts a large number of taxpayers, or
Extensive factual development, understanding of industry practices and views would assist the Service in determining the proper tax treatment.

18. Issues Not Appropriate for IIR
Generally, issues not appropriate for the IIR program include:
Issues unique to one or a small number of taxpayers.
Issues primarily under the jurisdiction of the Operating Divisions of the Service other than the LB&I and SB/SE Divisions.
Issues that involve transactions that lack a bona fide business purpose, or transactions with a significant purpose of improperly reducing or avoiding federal taxes.
Issues involving transfer pricing or international tax treaties.

19. CAP Overview
Collaborative program
Pre-file identification and resolution of issues
Efficient use of resources
Tax and financial reporting certainty

20. CAP Program Eligibility
Company assets > 10 million
Publicly-held entity
Privately-held with audited financial statements
No investigation/litigation that limits access to current corporate tax records.

21. CAP Program Background
2005: 17 taxpayers
CAP Pilot began
2011: 140 taxpayers
CAP Program Permanent
Compliance Maintenance and Pre-CAP added
2014: 185 taxpayers
2015: 194 taxpayers

22. Phases of the CAP Program
Pre-Compliance Assurance Process
Pre-CAP
Compliance Assurance Process
CAP
Compliance Maintenance CM

23. LB&I Examination Process
Update current Quality Examination Process
Leverage LB&I best practices
IDR Process
Claims process for issues not included in the exam plan

24. CIC Centralized Classification Process
Manage exam resources more effectively
Work Cases with higher compliance impact
Central Classification Team - Pilot

25. Questions 25