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Part 4. Examining Process

Chapter 51. LMSB Examinations

Section 4. LMSB/Appeals Fast Track Settlement Program (FTS)

4.51.4  LMSB/Appeals Fast Track Settlement Program (FTS)

4.51.4.1  (01-01-2007)
Introduction to FTS Program

  1. A primary objective of the Service is to resolve tax differences at the lowest level without sacrificing the quality and integrity of those determinations.

  2. Fast Track Settlement was developed as an alternative dispute resolution process to further the Service's goal of resolving tax controversies on a basis that is fair and impartial to both the government and the taxpayer.

  3. FTS will improve business practices by addressing Service and taxpayer disputes as early as possible to reduce burden for both parties.

  4. The LMSB, PQA Fast Track web page http://lmsb.irs.gov/hq/pqa/Post-filing/pfa_fast_track_home.asp contains many tools and links designed to help LMSB personnel during consideration and participation in the process.

4.51.4.2  (01-01-2007)
Overview of FTS Program

  1. Revenue Procedure 2003–40,2003–1 C.B.1044 , formally established the FTS Program, with the goal of expediting case resolutions and expanding the range of dispute resolution options available to taxpayers.

  2. LMSB and the Office of Appeals jointly manage and administer the FTS Program.

  3. FTS provides LMSB and taxpayers an opportunity to resolve their disputes with an Appeals Official providing mediation skills and settlement authority.

4.51.4.2.1  (01-01-2007)
Program Objectives

  1. Fast Track Settlement will enable taxpayers and the IRS to work together to resolve outstanding issues while the case remains in LMSB jurisdiction.

  2. FTS program is designed to:

    1. Increase issue resolution at the lowest level

    2. Use Appeals tools in LMSB

    3. Decrease overall time from return filing to ultimate resolution

    4. Ensure process meets the needs of the LMSB population

    5. Reduce burden for the taxpayer and the Service

4.51.4.2.2  (01-01-2007)
Collaborative Dispute Resolution Process

  1. FTS takes place while the case is in LMSB jurisdiction and is designed to be completed in approximately 120 days.

  2. All three parties (LMSB, the taxpayer, & Appeals) are active participants in the process, and all three must agree before a proposed resolution can be implemented.

  3. FTS uses mediation techniques to focus issues and lead LMSB and the taxpayer to self-determine the outcome of the dispute.

  4. When a resolution can not be reached through mediation, Appeals may propose a resolution, but such proposal can not be imposed on either party.

4.51.4.2.3  (01-01-2007)
Considers Factual and Legal Issues

  1. While settlement authority is available in the process when needed, factual issues can usually be resolved within LMSB's existing resolution authority through mediation, without requiring settlement authority.

  2. For those issues not requiring settlement authority, Appeals will work to resolve the issue via a mediated agreement between the taxpayer and LMSB. For these issues, Appeals will generally not draft or execute a closing agreement.

  3. Issues involving legal interpretations generally require the consideration of the hazards of litigation. For these issues, Appeals will first work to mediate an agreement that falls within an acceptable range as determined by an analysis of the litigating hazards.

  4. Once an acceptable agreement has been reached, Appeals exercises delegated settlement authority to accept the settlement in a closing agreement that finally determines the treatment of the issues. Appeals will not execute a settlement agreement that does not fall within an acceptable range.

  5. For issues requiring settlement authority, Appeals will analyze the hazards of litigation in the same manner as would be done in the traditional Appeals process.

4.51.4.2.4  (01-01-2007)
Initiating FTS Process

  1. FTS may be initiated at any time after an issue has been fully developed.

  2. "Fully developed" will generally be indicated by:

    1. the issuance of a Notice of Proposed Adjustment (Form 5701) to the taxpayer clearly setting out the Government's position,

    2. a written responses from the taxpayer clearly defining their position and the basis for disagreement, and

  3. With the concurrence of the Appeals FTS Program Manager and the LMSB Territory Manager, an issue may be accepted when it is adequately developed to facilitate resolution, even though it may not be developed to the extent required for a Revenue Agent Report (RAR).

  4. When considering the use of FTS, it is recommended that the LMSB Team Manager contact his/her Territory Manager and/or the FTS Program Managers to discuss the case/issues. When the Team Manager considers it appropriate, and if requested, such discussions may include the taxpayer via conference call.

  5. Application procedures are discussed at IRM Section 4.51.4.4.3.

4.51.4.2.5  (01-01-2007)
FTS Program Tracking

  1. The Issue Management System (IMS) is the primary LMSB tracking tool for FTS, and it is important to accurately and timely complete appropriate FTS fields in the IMS system.

  2. The following fields have been established within IMS to track and monitor the FTS program in LMSB:

    1. "Fast Track Settlement" – A " Yes" in this field indicates that FTS was used.

    2. "Fast Track Settlement Offered" – A " Yes" in this field indicates that FTS was offered, but declined by the taxpayer.

    3. "Fast Track Settlement Start Date" - Date that FTS is initiated (application submitted and accepted).

    4. "Fast Track Settlement End Date" – Date FTS process is completed either with a signed agreement or by conclusion that agreement can not be reached.

    5. "Fast Track Settlement Amount Per Retn" – Amount claimed on the return relative to the FTS issue.

    6. "Fast Track Settlement Amt Per Exam" – Adjustment amount proposed relative to the FTS issue.

    7. "Amount Per Fast Track Settlement" – Adjustment amount agreed to through the FTS process.

  3. At a minimum, FTS data on IMS should be updated when the FTS process is initiated and when it is completed.

  4. IMS fields relevant to FTS may be modified, or new fields added as experience is gained with IMS and its reporting capabilities. Personnel inputting FTS data on IMS should be alert to such changes.

4.51.4.3  (01-01-2007)
Case Eligibility and Exclusions

  1. While most LMSB cases/issues can be successfully worked using FTS, some cases/issues are not eligible for, or are not appropriate for the process. LMSB Team Managers and Territory Managers, plus the Appeals FTS Program Managers will determine eligibility and appropriateness utilizing the following criteria.

4.51.4.3.1  (01-01-2007)
General Considerations

  1. The LMSB Team Manager and the taxpayer will evaluate their individual circumstances to determine if this process meets their needs to bring the case to conclusion within the agreed upon time frames.

  2. Fast Track Settlement may not be the appropriate dispute resolution process for all cases.

  3. The LMSB Team Manager and taxpayer should discuss other dispute resolution opportunities if a case is determined not to be eligible or appropriate for FTS.

  4. The greatest opportunity to reduce administrative burden and costs for all parties exist in cases where:

    1. All issues are raised and the examination process is nearly complete.

    2. All claims are filed and examined.

    3. Issues are fully developed.

    4. Taxpayer has stated their position in writing.

    5. Unagreed issues are limited in number.

  5. FTS process works best in cases where all unagreed issues are included in the application, however:

    1. Individual unagreed issues or groups of issues will be accepted for FTS in cases where it is determined to be in the best interest of tax administration.

    2. Acceptance of individual issues may be limited due to availability of Appeals resources.

  6. When FTS is unsuccessful in resolving all issues, the taxpayer will be offered the opportunity to pursue resolution through traditional Appeals.

  7. If the traditional Appeals process is pursued, Appeals management will take appropriate action to fulfill the Appeals policy to be fair and impartial. This may, but does not require the assignment of new Appeals personnel. This policy should be made clear to the taxpayer at the beginning of the process, and if the taxpayer is unable to accept this policy, the taxpayer may decide to forego the Fast Track option and go to traditional Appeals.

4.51.4.3.2  (01-01-2007)
Eligible Cases

  1. Generally cases worked under the jurisdiction of LMSB are eligible for FTS.

  2. Cases with specialized issue characteristics including the following may be eligible for FTS with some restrictions:

    1. Coordinated Issues

    2. Industry Specialization Issues.

    3. Listed transaction issues.

  3. Under limited circumstances, cases with specialized procedural characteristics may be accepted for FTS with approval of the Appeals FTS Program Managers and LMSB Territory Manager and with special handling procedures. These cases include:

    1. Cases involving taxpayers in bankruptcy where LMSB follows the provisions of IRM 4.27, Bankruptcy - Examiners Responsibilities , regarding notification to Chief Counsel and Department of Justice. Since the final tax determination is under the jurisdiction of a court, a closing agreement will generally not be used. The decision to reduce the liability in the proof of claim rests with LMSB, in accordance with Chief Counsel and Department of Justice.

    2. Cases involving Tax Equity & Fiscal Responsibility Act of 1982 (TEFRA) procedures where the first level entity and the major controlling shareholder/partners are included in the Fast Track Session. LMSB will complete the required TEFRA administrative proceedings, including Notice of Proposed Adjustment (NOPA), Notice of Beginning Administrative Proceedings (NBAP), and Notice of Final Partnership Administrative Adjustment (FPAA) procedures for all levels, including investor statutes. Appeals will provide an Appeals Official to conduct the Fast Track Session at the first entity level and help the parties reach a settlement. A Waiver on Assessment Form 870P-AD type of agreement will be used to secure agreement from the entity and controlling shareholders/partners. Closing agreements are not normally used in TEFRA cases, but may be used at the option of the parties.

    3. Joint Committee cases, utilizing procedures under Section 4.51.4.6 and IRM 4.36 .

  4. Non-LMSB Cases

    1. Cases outside of LMSB jurisdiction may be accepted for the FTS process with the concurrence of the Appeals FTS Program Manager and the approval of the referring Operating Divisions's first line management.

    2. An SB/SE case involving significant issues with broad impact and requiring settlement authority would be an example of Non-LMSB case that may be eligible for FTS. (e.g. - an SB/SE Examination Specialization and Abusive Schemes case).

    3. For Non-LMSB cases accepted into the FTS program, the appropriate compliance first line manager responsible for the case will carry out the responsibilities of the LMSB Team Manager under FTS procedures.

    4. For Non-LMSB cases accepted into the FTS program, the affected Non-LMSB Operating Division will carry out the responsibilities of the LMSB Operating Division under FTS procedures.

4.51.4.3.3  (01-01-2007)
Cases and Issues Not Appropriate for FTS

  1. The following cases/issues are generally not appropriate for the Fast Track Settlement Program:

    1. Issues docketed before any court for the taxpayer requesting FTS.

    2. Cases for which a 30-Day Letter has been issued.

    3. Issues challenging the constitutionality of tax laws.

  2. Certain issues will be excluded from FTS as follows:

    1. Issues in a taxpayer's case designated for litigation.

    2. Issues in a taxpayer's case under consideration for designation for litigation.

    3. Issues for which the taxpayer has filed a request for competent authority assistance.

    4. Issues for which the taxpayer has requested the simultaneous Appeal/Competent Authority procedure described in section 8 of Rev. Proc. 2002-52 , 2001-31 IRB 242.

    5. Issues/cases outside LMSB jurisdiction except as noted in IRM 4.51.4.3.2. above.

    6. Issues that are part of a whipsaw transaction.

    7. Issues for which mediation would not be consistent with sound tax administration.

    8. Issues that have been identified in a Chief Counsel Notice, or equivalent publication, as excluded from the FTS process.

  3. Issues specifically excluded under (2) above will result in the exclusion of the entire case.

  4. Issues for which the Service is in the process of establishing a uniform settlement position (e.g. - certain listed transactions) may be excluded from FTS.

4.51.4.4  (01-01-2007)
General Procedures

  1. LMSB and Appeals have established joint operating procedures for the case application, submissions, screening and resolution processes.

  2. Joint LMSB/Appeals procedures are covered by this IRM subsection.

  3. Additional procedures applicable only to the Appeals function for FTS cases may be found in IRM Part 8.

4.51.4.4.1  (01-01-2007)
Consideration of Fast Track Settlement

  1. Fast Track Settlement is premised on the basis that the LMSB Team Manager and taxpayer have exhausted existing issue resolution strategies available within LMSB.

  2. Fast Track Settlement is an alternative dispute resolution (ADR) initiative which must be considered by the LMSB Team Manager when there are unagreed issues which can not be resolved between the taxpayer and the examination team alone. Such consideration, and conclusion reached, will be documented in the case activity record and/or case binder.

  3. Consideration of FTS for unagreed issues will be documented during the risk analysis process, using Form 13744. Consideration may also be documented on the case activity record.

  4. The taxpayer should be provided with a copy of the Fast Track Settlement Publication #4539 at the opening conference.

  5. At a minimum, the potential use of Fast Track should be discussed at the following points in the examination process:

    1. Examination opening conference

    2. Mid-cycle case review

    3. When potentially unagreed issues are proposed (Form 5701 has been revised to include an FTS reminder.)

  6. To ensure that the taxpayer has a basic understanding of the FTS process, the LMSB team should ensure that the taxpayer is familiar with Rev. Proc. 2003-40 and if need be, provide a copy of the Rev. Proc. prior to considering an application.

  7. Participation in Fast Track Settlement does not preclude the taxpayer from requesting traditional Appeals consideration if the FTS process is not successful in resolving the case.

4.51.4.4.2  (01-01-2007)
Determining Eligibility/Suitability

  1. The LMSB Team Manager will explain the Fast Track Settlement process to the taxpayer and determine whether the case qualifies for Fast Track Settlement using the case eligibility and exclusion criteria of IRM Section 4.51.4.3 .

  2. When deciding if the issue is adequately developed, it is recommended that the Team Manager discuss the development of the proposed adjustment with the appropriate LMSB Technical Advisor (T/A) when the issue falls within the purview of the T/A.

  3. The LMSB and Appeals Program Managers will be available to assist the parties to determine whether the case is suited for the FTS process

  4. If the case does not qualify for FTS, the standard examination procedures and closing process are to be followed.

  5. Any request for FTS denied to the taxpayer by the LMSB Team Manager, requires concurrence of the LMSB Territory Manager.

  6. In all cases, the Team Manager will forward a copy of any denied request, along with a brief statement as to the reasons for denial, to the LMSB Territory Manager. A pro forma memo requesting Territory Manager concurrence with Fast Track denial is contained at Exhibit 4.51.4-4.. A completed copy of this memo will be maintained in the case file.

4.51.4.4.2.1  (01-01-2007)
Screening and Approval of Application

  1. The FTS application is submitted by the LMSB Team Manager simultaneously to his/her Territory Manager and the Appeals FTS Program Manager with an information copy to the LMSB FTS Coordinator.

  2. The Appeals FTS Program Manager, in coordination with the LMSB Territory Manager, and advice of the LMSB FTS Program Manager as needed, will screen the applications to insure the case is appropriate for FTS.

  3. Acceptance or rejection of an FTS application will be based on a review of information submitted, discussions with the LMSB Team Manager, and the recommendation of the assigned Appeals Team Manager.

  4. The Appeals Program Manager will determine availability of Appeals staffing resources before accepting the case.

  5. If accepted, the LMSB Team Manager and the taxpayer will be contacted by the assigned Appeals Officer within ten days of receipt of the application.

  6. If a decision is made not to accept a case into the FTS Program, the LMSB Territory Manager and Appeals FTS Program Managers will jointly notify the LMSB Team manager and the taxpayer within ten days of receipt of the application.

4.51.4.4.3  (01-01-2007)
LMSB Procedures

  1. This section discusses the general procedures to be followed by LMSB personnel to initiate the application and acceptance process for FTS cases.

4.51.4.4.3.1  (01-01-2007)
LMSB Participation in the Fast Track Settlement Process

  1. LMSB team is fully involved in the Fast Track Settlement process as an equal participant.

  2. LMSB participants will include the Team Manager (the LMSB decision maker) and others who have acknowledge and expertise which may contribute to issue resolution.

  3. In addition to the Team Manager, participants will generally include the Team Coordinator and/or Revenue Agents primarily responsible for the development of the subject issue(s).

  4. LMSB participants may also include specialists and/or Technical Advisors. In those instances where the issues are industry specific or there has been a Technical Advisory position established for the issue, the participation of appropriate Technical Advisors is strongly recommended.

  5. The LMSB Team Manager, in consultation with the Appeals Team Case Leader, will determine the LMSB participants.

4.51.4.4.3.2  (01-01-2007)
Submission of Application

  1. When issues are identified as potentially appropriate for FTS settlement by either the taxpayer or the examination team, the LMSB Team Manager will discuss the issues and case with the taxpayer. Discussions should include:

    1. Suitability of issues for the FTS process,

    2. Willingness of both parties to consider alternative resolution options

    3. Adequacy of issue development, and

    4. Ability of both parties to devote resources to the process.

  2. The LMSB Team Manager is encouraged to phone the LMSB Territory Manager, the LMSB Program Manager and/or the Appeals FTS Program Manager to discuss the case and/or issues before the Fast Track Settlement Package is completed.

  3. The LMSB Team Manager and the taxpayer will identify a preferred conference site, and Appeals will make every attempt to hold the Fast Track Session conference at the preferred site, but may not in all cases be able to honor the taxpayer/LMSB request.

  4. Upon reaching agreement to participate in the Fast Track Settlement process, both the taxpayer and LMSB Team Manager will jointly complete and sign the "Application for Fast Track Settlement." See Exhibit 4.51.4-2..

  5. The LMSB Team Manager shall call the Appeals Program Manager for the location of the servicing Appeals Office.

  6. The application package ("Application for Fast Track Settlement, " Form 5701, and taxpayer's written responses) will be forwarded to the servicing LMSB Appeals Office within three business days of obtaining the taxpayer's signature.

  7. Jurisdiction, including statute of limitation responsibility, remains with LMSB; therefore, the case file will not be forwarded to Appeals.

4.51.4.4.3.3  (01-01-2007)
Forwarding Application for LMSB Fast Track to Approving Managers

  1. Prior to the submission of the full application package described above, the LMSB Team Manager will make the following submissions.

    1. The LMSB Team Manager will fax a copy of the "Application for Fast Track Settlement" to both the LMSB Territory Manager and the Appeals FTS Program Manager.

    2. The LMSB Team Manager will include with the faxed application the "LMSB Fast Track Settlement Application Issue Statement" (IRM Exhibit 4.51.4–1) for each issue being referred.

    3. The Issue Statement will contain a descriptive name of the issue being referred, the UIL number, dollar amounts by year, and a brief statement of basis for the proposed adjustment and the taxpayer's basis for disagreement.

    4. An information copy of the "Application for Fast Track Settlement " and the "LMSB Fast Track Settlement Application Issue Statement" will be faxed to the LMSB FTS Program Coordinator.

4.51.4.4.4  (01-01-2007)
Appeals Procedures

  1. This section discusses the general procedures to be followed by Appeals personnel regarding the application, acceptance and case assignment process for the FTS Program.

  2. Further specific Appeals procedures are contained at IRM Part 8.

4.51.4.4.4.1  (01-01-2007)
Appeals Participation in the Fast Track Settlement Process

  1. Appeals functions in a mediation role to guide LMSB and the taxpayers to a mutually acceptable resolution.

  2. Appeals plays an active role in the issue resolution process.

  3. When appropriate, Appeals may advocate a resolution position, but can not impose such position on either party.

  4. When appropriate, Appeals will utilize delegated settlement authority to implement an agreed upon resolution.

  5. Fast Track Settlement cases are assigned to Appeals Officers, as listed below:

    1. Primarily assigned to a Grade 15 Appeals Team Case Leader (ATCL) trained in mediation.

    2. In limited cases, assigned to Grade 14 Appeals Officers, trained in mediation, working in conjunction with Appeals Team Manager

  6. The Appeals FTS team may include Appeals Technical Guidance Coordinators (TGC) for CCI & ACI issues when appropriate.

  7. Other Appeals Officers will be assigned to the team as needed, and at the discretion of the ATCL/ATM.

  8. Appeals may utilized mediation trained individuals from other divisions as co-mediators when their specific insight and technical knowledge of the issue being considered would make such participation beneficial to resolution of the issue.

4.51.4.4.4.2  (01-01-2007)
Appeals Process for Assignment of Fast Track Settlement Cases

  1. When the application is ready for submission, the LMSB Team Manager will call the Appeals FTS Program Manager, who will provide direction as to the Appeals office to which to send the full application package.

  2. In most cases, the Appeals FTS Program Manager will alert the ATM that a Fast Track Settlement case is being sent to the local office. When time permits, the ATM and Appeals FTS Program Manager will preassign an Appeals Official to the case.

  3. Within three business days of receipt, the ATM will review the application to determine if the FTS eligibility requirements are met. The ATM may involve an ATCL or other Appeals Official in the review.

  4. If the ATM determines the case is eligible, the ATM must contact the Appeals FTS Program Manager to discuss acceptance of the case.

  5. ATM will recommend that the FTS Program Mangers accept the case by signing the application form. The Appeals FTS Program Manager and the LMSB Territory Manger will decide whether to accept the application after considering the ATM's recommendation and other factors.

  6. If the ATM/ATCL does not recommend acceptance of the case, this will be communicated to the Appeals FTS Program Manager, who may assign the application to another ATCL for a second review.

  7. Any case started without the approval of the both Appeals FTS Program Manager and the LMSB Territory Manager will, at the discretion of the respective Managers, be treated as a withdrawn case.

  8. Except with the concurrence of the LMSB Territory Manager and the Appeals FTS Program Managers, the FTS process is limited to 120-days. The start date for the 120-day Fast Track process is the date the Appeals Official is assigned to the case.

4.51.4.4.4.3  (01-01-2007)
Cases Not Ready for Fast Track

  1. It is anticipated that the issues are fully developed and that requests for Technical Advice, Field Service Advice, etc. will not be made during the FTS process. Cases requiring further issue development action are not ready for FTS, and the ATM will recommend rejection accordingly.

  2. If the ATM determines that the case does not qualify for FTS (e.g. issues not fully developed, issues do not qualify, Appeals resources are not available, issues excluded), the ATM will discuss the rationale for the denial with the Appeals FTS Program Manager.

  3. Appeals FTS Program Manager may concur with the recommended denial of the FTS request, or may accept the case and identify necessary resources.

  4. If the FTS request is recommended for rejection, the Appeals FTS Program Manager will discuss the rationale for rejection with the LMSB Territory Manager and the LMSB FTS Program Manager.

  5. The Program Managers will discuss the rationale for the denial with the taxpayer and LMSB Team Manager within ten business days of receipt of the application.

4.51.4.4.4.4  (01-01-2007)
FTS Application Package Received Directly in Local Appeals Office

  1. If a local Appeals office receives a Fast Track Settlement application directly from the LMSB Team Manager, rather than through established channels, Appeals Records will immediately fax a copy of the Application for FTS to the Appeals FTS Program Manager, and contact the ATM servicing the local office.

  2. The ATM must contact the Appeals FTS Program Manager to discuss acceptance of the case into FTS. If Appeals Records did not complete the fax action, the ATM will fax a copy of the Application for FTS to the Appeals FTS Program Manager.

4.51.4.4.4.5  (01-01-2007)
Case Accepted for Fast Track and Assigned in Appeals

  1. After the Application for Fast Track Settlement is accepted by the LMSB Territory Manager and Appeals FTS Program Managers, the ATM will assign an Appeals Officer or an Appeals Team Case Leader within seven business days of receipt of the application.

  2. Appeals will normally accommodate the site jointly requested by the LMSB Team Manager and the taxpayer.

  3. Where travel or personnel resource limitations impose restrictions on Appeals ability to accommodate the requested site, approval of the Appeals FTS Program Manager is required to use an alternative site.

  4. The ATM and ATCL shall coordinate the need to use a team of Appeals Officers.

  5. Where the case includes Appeals Specialty Issues, the Appeals Officer or ATCL will follow IRM requirements to refer the issues to the Appeals Director Technical Guidance staff. Such referral shall be initiated by phone and followed up with a formal written referral. The Appeals Technical Guidance Coordinator (TGC) may be assigned if warranted.

  6. Request may be made to Appeals Management for specific assignment of Appeals officers with experience or particular technical expertise involving the issue, such as CCI/ACI issues, international issues or listed transactions.

4.51.4.4.4.6  (01-01-2007)
Appeals Official's Role Upon Assignment

  1. Within ten business days after the case is assigned, the Appeals Official will call the taxpayer and LMSB Team Manager to start the Fast Track Session planning process.

  2. The Appeals Official may identify and discuss the need to limit the number of participants to the Fast Track Session.

  3. Fast Track cases are excluded from the Settlement Authority Panel Review because LMSB must agree to any disposition of the issues.

4.51.4.4.4.7  (01-01-2007)
Appeals CCI/ACI Coordinator's Role in Coordinated Issues

  1. Where an issue is coordinated as either a CCI or ACI issue, the Appeals Team shall follow the procedures in IRM Section 8.7.3.6.

  2. To meet the two pronged requirement that all decision makers are present at the Fast Track Session and that Coordinated CCI/ACI issues are subject to the review & concurrence of the Appeals Coordinator, the Appeals Coordinator will normally serve as a team member and will participate in the Fast Track Session with the taxpayer and LMSB.

  3. If the TGC is not part of the Fast Track Appeals Team, settlement of the CCI/ACI issue remains subject to the review & concurrence of the TGC. This may be accomplished via telephone discussion.

  4. If there is a disagreement between the TGC and the appeals officer on appropriate settlement terms for the issue, the resolution procedures in IRM Section 8.7.3.6.2. will be followed.

4.51.4.4.4.8  (01-01-2007)
Role of LMSB Participants in Fast Track Sessions

  1. The LMSB Team Manager will :

    1. Determine the composition of the LMSB Fast Track team.

    2. Serve as LMSB's decision maker for all issues under FTS consideration. However, at the discretion of LMSB, decision making authority may be assumed by a higher level LMSB management official who participates in the session.

    3. Attend all FTS session meetings and consider information and arguments presented by issue specialists for all parties.

  2. LMSB specialists, specialist managers, technical advisors, and revenue agents selected by the Team Manager to be part of the LMSB team will:

    1. Be the primary presenters of LMSB's position and technical arguments for issues under consideration.

    2. When appropriate, provide rebuttals to arguments raised by the taxpayer.

    3. Provide consultation and advice to the LMSB decision maker regarding proposed settlements.

  3. When LMSB Counsel representatives are part of the LMSB Fast Track team, they will be active participants. Counsel's primary role will be to provide advice to LMSB as to legal interpretations and appropriateness of proposed settlements. In addition, at the discretion of the LMSB Team Manager, Counsel may participate in the presentation of the LMSB position and technical arguments for the issues under consideration.

4.51.4.5  (01-01-2007)
Introduction to the Fast Track Session

  1. The Fast Track Session consists of all the activities occurring over the period of time from the date the case is accepted thought the face-to-face session involving all three parties.

4.51.4.5.1  (01-01-2007)
Planning the Fast Track Session

  1. Planning begins when the taxpayer and LMSB complete the Application for Fast Track Settlement form, which includes a target completion date.

  2. The parties are encouraged to bring their best experts into the Fast Track Settlement process. It is required that the "decision makers" be present.

  3. Appeals will lead the taxpayer and LMSB to develop an overall plan for the Fast Track Session. The plan will include the preparation of an agenda and Fast Track Session Report (IRM Section 4.51.4.5.3.5).

  4. The parties must agree upon a plan to complete the Fast Track Session within 120-days.

4.51.4.5.2  (01-01-2007)
Developing the Fast Track Session Report and Agenda

  1. In conducting the Fast Track Session, the Appeals Official will use a Fast Track Session Report (IRM Exhibit 4.51.4–3) and an Agenda. The Agenda will guide the following:

    1. Communication,

    2. Setting the order of issue discussion,

    3. Ask reflective questions to clarify the issues; and

    4. Conference meetings.

  2. The Appeals Official will provide the Fast Track Session Report and Agenda to all decision makers early the process, and will update them as the session progresses.

4.51.4.5.3  (01-01-2007)
Conducting the Fast Track Session

  1. The Fast Track Session will be lead by Appeals, but all three parties will be active participants with equal voices.

  2. FTS employs various alternative dispute resolution techniques to propose solutions.

  3. Appeals does not perform in a traditional Appeals role, but will first use an interest-based approach to facilitate a settlement of the issues between the parties.

  4. Using mediating techniques, Appeals will attempt to bring the parties to a mutual resolution of the issues during the Fast Track Session.

  5. As issues are resolved, Appeals will post the results to the Fast Track Session Report and give an updated copy to all participants. Appeals will maintain a history of the updated Fast Track Session Report.

  6. The Fast Track Session may include both combined meetings with LMSB, taxpayer and Appeals together, and separate meetings (LMSB-Appeals, and taxpayer-Appeals) as appropriate.

4.51.4.5.3.1  (01-01-2007)
Appeals Recommendations During Fast Track Session

  1. Appeals may use various methods and techniques to meet the needs and circumstances of each particular case.

  2. The Appeals Official may ultimately make recommendations regarding the settlement of any or all issues (both factual and legal). If acceptable to all parties, the settlement proposal may be adopted.

  3. Neither party is compelled to accept a settlement proposal made by the Appeals Official.

  4. In order to implement an Appeals' settlement proposal both LMSB and the taxpayer must agree. If the taxpayer and Appeals agree upon a settlement proposal, but the LMSB Team Manager rejects the proposal, the settlement rejection will be referred to the LMSB Territory Manager for review.

  5. If the LMSB Territory Manager concurs with the proposed settlement rejection, such rejection must be expressed in writing by the Territory Manager. If an acceptable alternative settlement can not be reached, the issue will be closed unagreed. If the Territory Manager does not concur in rejecting the Appeals settlement proposal, the proposal will be accepted by LMSB.

4.51.4.5.3.2  (01-01-2007)
Ex Parte Communications

  1. The prohibition on ex parte communications between Appeals Officers and other Internal Revenue Service employees provided by section 1001(a)(4) of the Internal Revenue Service Restructuring and Reform Act of 1998 does not apply to the communications arising in Fast Track Settlement, because the Appeals personnel are not acting in their traditional appeals' settlement role.

  2. If the Fast Track Settlement process is unsuccessful, Appeals may not issue a statutory notice, the taxpayer retains the traditional appeals rights, and the process occurs under LMSB jurisdiction.

4.51.4.5.3.3  (01-01-2007)
New Information Disclosed as Part of Fast Track Process

  1. If the taxpayer or LMSB presents new information during the Fast Track Session that the opposing party has not considered, Appeals will give the receiving party adequate time to evaluate the information/documentation.

  2. Where consideration of substantial new information will unacceptably delay the Fast Track Session, the case may be withdrawn from FTS by Appeals, LMSB or the taxpayer. Such a case may be reaccepted for FTS after the issues are fully developed.

  3. In situations where substantial new information is disclosed as part of the FTS process, it may serve as a basis to raise a new issue or file a claim. Where the process will not be delayed beyond 120-days, and all parties agree to accept the new issue or claim, it may be accepted into the existing FTS process, subject to limitations discussed under Section 4.51.4.5.3.4.

4.51.4.5.3.4  (01-01-2007)
New Issues/Claims Raised During Fast Track Session

  1. Experience proves that lapse time is doubled when new issues or claims are brought into Fast Track Settlement after the process is started. For this reason, new issues or claims will generally not be accepted as part of the FTS process.

  2. The grounds for raising a new issue or claim must be substantial, and the potential effect on the tax liability must be material. New issues or claims should not be raised to trade against existing issues.

  3. A taxpayer's claim requires LMSB examination action. However, such action need not be part of the FTS process.

  4. New, unrelated claims or new issues should not be attached to an existing FTS process, but should generally be considered in a separate process outside of FTS.

  5. The parties will work to resolve the issues originally referred to Fast Track Settlement and the FTS process will not be suspended to allow examination of the new claims/issues.

  6. If the taxpayer declines to bring the Fast Track process to a conclusion prior to consideration of such claims, the Service may withdraw the case from FTS. The taxpayer may then request further FTS consideration.

  7. Once a case comes to FTS, the taxpayer and Service should expect that all the issues and claims have been raised, that all relevant information has been disclosed, and that the case is ready for resolution.

  8. Addressing this challenge, and to prevent new issues arriving late in the process, the Appeals Official shall confirm that all issues are listed on the Fast Track Session Report at the beginning of the process.

4.51.4.5.3.5  (01-01-2007)
Developing the Fast Track Session Report

  1. The Fast Track Session Report (Exhibit 4.51.4-3), is an administrative document that assists all parties in planning the Fast Track Session and reports the progress on the issues in dispute.

  2. At the conclusion of the process, the Fast Track Session Report forms the basis for drafting closing agreements and the Revenue Agent's Report (RAR).

  3. The Fast Track Session Report is used to identify the issues and reflect agreement from all parties as to the following:

    1. Number of issues;

    2. Description of issues;

    3. Amounts in dispute;

    4. Conference dates; and ,

    5. Plan of action to be followed in the Fast Track Session process.

  4. In addition to documenting all contacts in the Appeals Centralized Data System (ACDS) activity record and conference notes, the Appeals Official will prepare the Fast Track Session Report (Session Report) at the start of the Fast Track Process, and update the Session Report timely as decisions are made.

  5. The Appeals Official will:

    1. Give both taxpayer and LMSB a copy of the Session Report at the beginning of the process, after each decision is reached and when the Session Report is updated,

    2. Confirm that the parties agree with the entries on the Session Report, and,

    3. Solicit the signatures of the taxpayer and LMSB Team Manager on the Session Report at the conclusion of the session (agreed or unagreed).

  6. The signing of the Fast Track Session Report does not constitute a final settlement. The signature on the Fast Track Session Report carries no more force and effect than a memorandum of understanding between the parties.

  7. The Fast Track Session Report is not a waiver of restrictions on assessment, nor does it terminate consents to extend the statute of limitation, nor does it start the running of any statute of limitations, i.e. - one-year statute under section 6629(f) involving TEFRA proceedings.

  8. The signature of a Service Official on the Fast Track Session Report does not create a promise against reopening the case.

4.51.4.5.3.6  (01-01-2007)
Reconsideration of Fast Track Session Report Agreements

  1. The Fast Track Session Report Agreement shall be treated as final when it is signed, unless the specific conditions outlined below warrant altering the agreement.

    1. If an agreement is reached in a signed Fast Track Settlement Session Report, but a subsequent authoritative decision is rendered that affects the agreement in a substantive and material manner, either LMSB or Appeals may reconsider the agreement unless both the taxpayer and Appeals previously signed a closing agreement (Form 906 or 870-AD).

    2. If the change is substantive and material, the agreement should be renegotiated. The word substantive shall mean that the change in law or legal precedent results in a meaningful change to Appeals assessment of the hazards of litigation.

    3. Any agreement reached in a Fast Track Settlement Session may be reopened in the case of fraud, malfeasance, concealment or misrepresentation of material fact.

    4. The grounds for such action must be substantial (strong, possessing real merit) and the potential effect on the tax liability is material (having real importance and great consequence).

    5. NEW ISSUES - There must be some good, sound, substantial grounds already existing in the record or known to the decision maker to raise the new issue.

    6. Substantial grounds are those that cause a decision maker to be quite certain, at the time a new issue is raised, that the Government will prevail if the issue is litigated. Quite certain does not necessarily mean 100 percent certain, but it does mean a very high degree of certainty.

    7. Outside of these strict parameters, LMSB and Appeals shall respect the settlement terms agreed to on the Fast Track Session Report.

  2. Appeals commits to advocate the agreement reached in a signed Fast Track Session Report to reviewing authorities, such as the Joint Committee on Taxation.

  3. In the event of a request to reconsider the Fast Track Session Report agreement, the LMSB and Appeals FTS Program Managers must agree to reconsider the agreement. In the event the two parties are unable to agree, the decision shall be elevated to the Executive Owners of the Fast Track Settlement process.

4.51.4.5.3.7  (01-01-2007)
Appeals or LMSB May Terminate the Fast Track Session

  1. If after a reasonable time, it is apparent that no further benefit may be derived from the process, the LMSB Team Manager and/or the Appeals Officer/Appeals Team Case Leader should consider terminating the session.

  2. If the Appeals Officer or an Appeals Team Case Leader (ATCL) decides to terminate the Fast Track Session, concurrence of the Appeals FTS Program Manager is required.

  3. If the LMSB Team Manager decides to terminate the Fast Track Session, concurrence of the appropriate Territory Manager is required.

  4. The party terminating the Fast Track Session shall notify the other parties by letter explaining the reason for termination and outlining the taxpayer's right to a traditional Appeals process.

  5. If no issues have been resolved prior to withdrawal, no further reporting to the taxpayer or LMSB by Appeals will be required.

  6. If some issues have been resolved at the time of withdrawal, standard FTS process closing procedures will be followed with regard to the resolved issues.

  7. The taxpayer will retain all standard Appeals rights with regard to any issues remaining unresolved at the time of withdrawal.

4.51.4.5.3.8  (01-01-2007)
Taxpayer May Withdraw at Any Time

  1. The taxpayer may withdraw from the FTS process at any time by notifying the LMSB Team Manager and the Appeals representative in writing.

  2. For any issue(s) that remain unresolved, taxpayers will retain all of the standard Appeals rights.

  3. LMSB will close the case as "Unagreed" or " Partially Agreed" as appropriate and forward to Appeals upon receipt of an acceptable protest and request for an Appeals hearing from the taxpayer.

  4. The taxpayer should be advised that the case will be closed through the standard LMSB closing process.

4.51.4.5.3.9  (01-01-2007)
Fast Track Settlement Authority

  1. Appeals has settlement authority under Delegation Order 97.

  2. An Appeals Official, such as an ATCL or Appeals Team Manager, uses delegated settlement authority to approve and enter into any FTS Agreement that involves hazards of litigation by using a Specific Matters Closing Agreement (Form 906) or a waiver Form 870-AD.

  3. Appeals makes its own evaluation of the hazards on Fast Track issues. LMSB should not commit or appear to commit to a settlement that exceeds their authority to resolve issues prior to referral to Fast Track Settlement.

  4. Potential settlement positions that may have been discussed with the taxpayer before an FTS referral may be presented to the Appeals Official for consideration during the Fast Track session. However, Appeals will do an independent evaluation of the hazards and will not execute a settlement that does not fall within such hazards evaluation or established settlement guidelines for the issue.

  5. If the Appeals Official does not accept a settlement proposed between the taxpayer and LMSB, the Official will explain in full to both parties why it cannot be accepted.

  6. If a Joint Committee report is required for the case, Appeals will delay execution of the closing agreement until LMSB completes the Joint Committee procedures. Where Appeals settlement authority has been utilized on a Joint Committee case, the Appeals Official involved in the settlement will be available to respond to inquiries from the Joint Committee regarding the settlement.

4.51.4.5.4  (01-01-2007)
Closing the Fast Track Settlement Process

  1. When the issues are resolved, or a decision is made that a resolution cannot be reached, the FTS case will be closed promptly.

  2. The Appeals Official will follow the FTS closing procedures carefully so that both parties are notified of the outcome.

  3. The closing letter will be issued promptly by Appeals to both parties, making certain to date the letter.

  4. If the case is unagreed an Appeals Case Memorandum (ACM) will not be prepared, and the administrative file will be returned to LMSB without Appeals notes prepared to evaluate the issue.

4.51.4.5.4.1  (01-01-2007)
Closing the FTS Process With Settled/Resolved Issues

  1. When an agreement is reached, a Fast Track Session Report will be completed by Appeals, reflecting the agreement, and all parties will sign the Report.

  2. Where Appeals settlement authority has been utilized, Appeals will prepare a closing agreement based on the signed Fast Track Session Report.

  3. When closing agreements have been used, the taxpayer will be asked to sign the agreement, and Appeals will execute it on behalf of the Government. In cases involving Joint Committee (JC) review, Appeals will close their FTS work unit without signing the closing agreement, and with instructions for LMSB to return the closing agreement to Appeals for execution of the agreement after the JC review process is complete.

  4. At the conclusion of the FTS process, Appeals will provide the LMSB team with the following:

    1. Form 5402 (Appeals Transmittal and Case Memo),

    2. Appeals Case Memorandum (ACM) for settled issues,

    3. Executed Closing Agreement if utilized (For JC cases, signed by the taxpayer only, and to be signed by Appeals after JC review.),

    4. Completed Fast Track Session Report,

    5. FTS workpapers prepared by Appeals, and

    6. Settlement agreements for TEFRA signed by taxpayer (A list of investor names, TINs, and one-year assessment dates will be shown on Form 3210 used to transmit the package to LMSB).

  5. Preparation of brief Appeals Case Memorandum (ACM)

    1. Prepared for issues settled using Appeals settlement authority.

    2. ACMs prepared for FTS cases will be a brief summary of significant facts, body of law relied upon by the parties, and evaluation and recommendation as to whether the disposition should be accepted.

    3. For JC cases, ACMs will be included in the JC Report in support of the settlement reached.

    4. ACMs will not be prepared for issues resolved within LMSB's resolution authority, or for unresolved issues.

  6. At the completion of the FTS process, LMSB will proceed to complete actions on the overall case. Resolved issues will be incorporated into the RAR, and LMSB will proceed to complete actions on the overall case, as indicated in IRM Section 4.51.4.7.

  7. The Appeals FTS participants will complete and submit internal Appeals reporting requirements in accordance with IRM 8.1 (Appeals).

  8. A report on the FTS case results will be provided to the LMSB Territory Manager and the LMSB FTS Program Manager by the Appeals FTS Program Manager. The report to consist of Form 5402, ACM for settled issues, completed FTS Session Report, and an ACDS summary printout.

4.51.4.5.4.2  (01-01-2007)
Closing the FTS Process with Unresolved Issues

  1. When the Fast Track Settlement process is unsuccessful in resolving/settling an issue (including withdrawn issues), at the time of closing the FTS case. Appeals will send a letter to both the taxpayer and LMSB, stating who participated, listing the issue that were not resolved, and explaining the taxpayer's rights to appeal.

  2. The administrative file consisting of the Form 5701 with the taxpayer's written response, FTS workpaper and Form 5402 will be provided to LMSB for inclusion in the case file. No ACM will be prepared for unresolved issues.

  3. At the completion of the FTS process, LMSB will proceed to complete actions on the overall case, as indicated at IRM 4.51.4.7..

  4. The Appeals FTS participants will complete and submit internal Appeals reporting requirements in accordance with IRM 8.6 .

  5. A report on the FTS case results will be provided to the LMSB Program Manager by the Appeals Program Manager.

4.51.4.6  (01-01-2007)
Fast Track Settlement and Joint Committee Cases

  1. Special procedures must be followed in cases subject to Joint Committee (JC) reporting requirements. General JC procedures under IRM 4.36 apply to cases utilizing the Fast Process. In addition to, and in conformity with the general JC procedures, the following apply to FTS cases.

  2. The FTS Application form provides for the identification of potential Joint Committee status. If the Joint Committee criteria are met, or will potentially be met upon resolution, the Team Manager must so indicate on the FTS Application.

  3. Upon assignment of a Fast Track case, Appeals must confer with both the taxpayer and LMSB to determine whether the case is subject to JC reporting requirements, and record the results in the ACDS case activity record.

  4. At the completion of the Fast Track process, the case status relative to JC reporting will be reconfirmed before finalizing the settlement, taking into consideration the results of any issue resolutions reached.

  5. Appeals is responsible for preparing the ACM supporting the basis of any issue settlements reached in Fast Track. Appeals will prepare an ACM that explains ONLY the SETTLED FTS issues in sufficient detail and analysis to apprise the JC of the Appeals evaluation and settlement of the Fast Track issues.

  6. On the day agreement is reached, the Fast Track Session Report will be completed to document the terms and settlement dollar adjustments. All parties (Appeals, taxpayer and LMSB) will sign off on the Session Report.

  7. Appeals will explain to the taxpayer that the settlement is treated as final for computation purposes, but that the settlement is subject to review by the Congressional Joint Committee on Taxation.

  8. LMSB may begin preparing the tax computation and the JC Report, incorporating the ACM provided by Appeals.

  9. Appeals will close the FTS case on Form 5402, and will give the ACM to LMSB for inclusion in their JC Report.

  10. The LMSB Team Manager may wish to consider requesting an on-sight review by LMSB JC reviewers prior to submitting the JC Report (see IRM 4.36.3 ).

  11. Since the case is in LMSB jurisdiction, LMSB will make the final tax computation, and write the JC Report.

  12. On the settled issues, Appeals will respond to any concerns raised by the JC regrading the basis for settlement.

  13. Issues resolved between the taxpayer and LMSB without the need for Appeals settlement authority (resolved within the LMSB Team Manager's authority), will not have an ACM, and LMSB will respond to JC inquires and concerns for these issues.

  14. Appeals will prepare the closing agreement on settled issues, and solicit the taxpayer's signature on the closing agreement, but the closing agreement shall not be signed by Appeals on behalf of the Service until the Joint Committee on Taxation clearance letter is received.

  15. After the Joint Committee on Taxation completes consideration of the settlement, only then will Appeals accept the final settlement by executing the closing agreement.

4.51.4.7  (01-01-2007)
Post Fast Track Settlement Process - LMSB Case Procedures

  1. When the FTS process is completed and all issues are resolved (or determined to be irresolvable at the LMSB level), LMSB will follow standard closing procedures.

  2. At the completion of the FTS process, if further issue/case development is required for FTS or non-FTS issue, it will be completed.

  3. For successful FTS cases, resolved issues will be included in the Revenue Agent's Report (RAR) in accordance with closing agreements and/or Fast Track Session reports resulting from the FTS process.

  4. Issues remaining unresolved will be included in the unagreed RAR, and a 30-Day Letter will normally be issued inviting the taxpayer to request a traditional Appeals hearing.

  5. When some issues are resolved, and other issues remain unagreed, standard partial agreed procedures will be followed in closing the case.

  6. When unsuccessful FTS cases come to traditional Appeals, management will decide how to assign the Appeals personnel. Ex parte restriction will not be imposed on intra-Appeals communications.

  7. Compliance audit results will include FTS issue results.

Exhibit 4.51.4-1  (01-01-2007)
LMSB Fast Track Settlement Application Issue Statement

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Exhibit 4.51.4-2  (01-01-2007)
Application for Fast Track Settlement

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Exhibit 4.51.4-3  (01-01-2007)
Fast Track Session Report

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Exhibit 4.51.4-4  (01-01-2007)
Territory Manager Concurrence Memo.

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