IRS Eliminates Appeals Arbitration Program

The Internal Revenue Service has gotten rid of a rarely used program that was supposed to allow taxpayers to expedite the appeals process.

The IRS issued Revenue Procedure 2015-44 on Tuesday, announcing the elimination of the Appeals arbitration program. The new revenue procedure obsoletes an earlier revenue procedure that formally established the Appeals arbitration program.

The IRS initially established the Appeals arbitration program as a two-year pilot program in 2000. A taxpayer and the Appeals function could jointly request binding arbitration on any issue that was left unresolved at the conclusion of appeals procedures or unsuccessful attempts to enter into a closing agreement under Section 7121 or a compromise under Section 7122 of the Tax Code. The pilot program was extended for another year in 2002.

During these pilot programs, Appeals offered an opportunity for taxpayers to request arbitration for certain factual issues that were already subject to the Appeals administrative process. On October 30, 2006, the IRS published Rev. Proc. 2006-44, 2006-2 C.B. 800, which formally established the Appeals arbitration program.

Generally, arbitration has been available under these procedures for cases in which a limited number of factual issues remain unresolved following settlement discussions in Appeals. In 2008, Appeals established a two-year pilot program to extend arbitration to certain collection cases. Under the pilot program, taxpayers in select cities were eligible to use arbitration to resolve certain offer in compromise and Trust Fund Recovery Penalty issues.

However, the program had little practical impact. During the 14-year period in which arbitration was available, only two cases were settled using arbitration, according to the IRS.

“Given the general lack of demand for arbitration and the fact that its use as a tool to settle disputes without litigation has not proven successful, the IRS is eliminating the arbitration program,” said the IRS. “Although Appeals arbitration is being eliminated, taxpayers may be eligible to request mediation for unresolved issues that remain after completion of settlement discussions in Appeals.”

The elimination of the Appeals arbitration program is effective the date the new revenue procedure is published in the Internal Revenue Bulletin, scheduled for Sept. 21, 2015.

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