n-99-50.pdf

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Part III - Administrative, Procedural, and Miscellaneous
PROHIBITION OF EX PARTE COMMUNICATIONS BETWEEN APPEALS OFFICERS
AND OTHER INTERNAL REVENUE SERVICE EMPLOYEES
Notice 99-50
This notice provides a proposed revenue procedure that, when finalized, will
provide guidance to address, in part, the directive in the Internal Revenue Service
Restructuring and Reform Act of 1998, P.L. 105-206, 112 Stat. 685 (RRA 98), to
develop a plan to prohibit ex parte communications between officers of the Internal
Revenue Service Office of Appeals (Appeals) and other Internal Revenue Service
employees that appear to compromise the independence of Appeals Officers.
Section 1001(a)(4) of RRA 98 states that the Commissioner’s plan to reorganize
the Internal Revenue Service shall ensure an independent Appeals function within the
Internal Revenue Service. The Treasury Department and the Internal Revenue Service
are developing the reorganization plan. As part of that plan, guidance for Internal
Revenue Service personnel and taxpayers is being developed to address the
prohibition of ex parte communications between Appeals Officers and other Internal
Revenue Service employees that appear to compromise the independence of Appeals
Officers.

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The proposed revenue procedure includes guidance, in the form of a series of
questions and answers, that address situations frequently encountered by Appeals
Officers during the course of an administrative appeal.
Before issuing final guidance, the Treasury Department and the Service invite
comments from the public to aid in the development of this revenue procedure. The
prohibition on ex parte communications will not take effect until the revenue procedure
is issued in final form. In the interim, existing procedures relating to communications in
the course of Appeals consideration of disputes remain in effect. Comments should be
submitted by December 3, 1999 either to:
Internal Revenue Service
National Director of Appeals
Attn.: C:AP:CIIT
1111 Constitution Ave.
Washington, DC 20224
or electronically via: http:/www.irs.gov/prod/tax_regs/comments.html (the Service
Internet site).

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Part III - Administrative, Procedural, and Miscellaneous
26 CFR 601.105: Examination of returns and claims for refund, credit, or abatement;
determination of correct tax liability.
PROHIBITION OF EX PARTE COMMUNICATIONS BETWEEN APPEALS OFFICERS
AND OTHER INTERNAL REVENUE SERVICE EMPLOYEES
PROPOSED REV. PROC. 99-XX
TABLE OF CONTENTS
SECTION 1. PURPOSE AND SCOPE
SECTION 2. BACKGROUND
SECTION 3. GUIDANCE CONCERNING THE EX PARTE COMMUNICATIONS
PROHIBITION DESCRIBED IN SECTION 1001(a)(4) OF THE INTERNAL REVENUE
SERVICE RESTRUCTURING AND REFORM ACT OF 1998
SECTION 4. EFFECTIVE DATE
SECTION 1. PURPOSE AND SCOPE
Section 1001(a) of the Internal Revenue Service Restructuring and Reform Act of 1998,
P.L. 105-206, 112 Stat. 685 (RRA 98), states that “The Commissioner of Internal
Revenue shall develop and implement a plan to reorganize the Internal Revenue
Service. The plan shall ...

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(4) ensure an independent appeals function within the Internal Revenue Service,
including the prohibition in the plan of ex parte communications between
appeals officers and other Internal Revenue Service employees to the extent
that such communications appear to compromise the independence of the
appeals officers.”
This revenue procedure contains guidance for Service personnel and taxpayers to
address the prohibition of ex parte communications between Appeals Officers and
other Internal Revenue Service employees that appear to compromise the
independence of Appeals Officers. The guidance is in the form of a series of questions
and answers that address situations frequently encountered by Appeals Officers during
the course of an administrative appeal.
SECTION 2. BACKGROUND
In 1927, the Internal Revenue Service established an administrative appeal process to
resolve tax disputes without litigation. Local appeals offices have traditionally been
separate from the IRS office that proposed the adjustment. However, section
1001(a)(4) of RRA 98 requires the IRS, as part of its reorganization plan, to establish
an independent Office of Appeals -- one that may not be influenced by tax collection or
examination employees through ex parte communications with Appeals Officers that
appear to compromise the independence of Appeals Officers.
SECTION 3. GUIDANCE CONCERNING THE EX PARTE COMMUNICATIONS
PROHIBITION DESCRIBED IN SECTION 1001(a)(4) OF THE INTERNAL REVENUE
SERVICE RESTRUCTURING AND REFORM ACT OF 1998

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Q-1 What is “ex parte communication” and when is it prohibited?
A-1 For the purposes of this revenue procedure, ex parte communications are
communications that take place in the absence of one of the parties to the
controversy -- specifically the taxpayer or his or her representative
(taxpayer/representative). Ex parte communications between Appeals Officers and
other Internal Revenue Service employees are prohibited to the extent that such
communications appear to compromise the independence of the Appeals Officers.
Q-2 Does the prohibition on ex parte communications extend to discussions
between the Appeals Officer and the originating office during the course of
preliminary review of a newly assigned case?
A-2 The Appeals Officer may ask general or clarifying questions which do not address
the strengths and weaknesses of the issues and positions taken in the case. For
example, the Appeals Officer may ask for clarification of a factual description or legal
assertion in the file without involving the taxpayer/representative. The Appeals Officer
may also ask whether certain information was requested and whether it was received.
The Appeals Officer, however, may not engage in discussions of the strengths and
weaknesses of the issues and positions in the case, which would appear to
compromise the Appeals Officer’s independence.
Q-3 Does the prohibition on ex parte communications change the criteria for
premature referrals?
A-3 As a general rule, there is no change to current procedures. In essence, RRA 98
reinforces the instructions in Internal Revenue Manual 8.2.1.2 and reaffirms Appeals’

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role as the settlement arm of the Service. If a case is not ready for Appeals
consideration, the Appeals Officer may return it for further development or for other
reasons described in IRM 8.2.1.2. The Appeals Officer may communicate with
Examination regarding the anticipated return of the case to the originating function, but
may not engage in a discussion of the strengths and weaknesses of specific issues or
positions, or the case as a whole, as part of a discussion of whether the premature
referral guidelines require further Examination activity.
Q-4 Is there any change to the Appeals new issue policy?
A-4 No. New issues must continue to satisfy the “material” and “substantial” tests of
IRM 8.6.1.4 and succeeding sections. The prohibition against ex parte communications
does not affect Appeals’ existing policy about raising new issues in Appeals. However,
any new issue must first satisfy Appeals’ new issue policy. If discussions with the
originating function are needed in order to evaluate the strengths and weaknesses of
the possible new issue, the taxpayer/representative must be given an opportunity to
participate in such discussions. Appeals will continue to follow the principles of Policy
Statement P-8-49 and the “General Guidelines” outlined in IRM 8.6.1.4.2 in deciding
whether or not to raise a new issue.
Q-5 May Appeals Officers continue to have ongoing communication with the
originating function during the course of an appeal?
A-5 The prohibition on ex parte communications will affect the manner in which
Appeals has traditionally operated during the course of the appeal. The Appeals
Officer must give the taxpayer/representative the opportunity to participate in any

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discussions with the originating function regarding the strengths and weaknesses of an
issue or position in the case.
Q-6 What should the Appeals Officer do if new information or evidence is
submitted? Can Appeals still return the new material to the originating function
for review and comment?
A-6 There is no change to existing procedures. The principles in IRM 8.2.1.2.2 remain
in effect. The originating function should be given the opportunity to timely review and
comment on significant new information presented by the taxpayer. “Significant
new information” is information of a non-routine nature which, in the judgment of the
Appeals Officer, may have had an impact on the originating function’s findings or which
may impact on the Appeals Officer’s independent evaluation of the litigating hazards.
Generally, the review can be accomplished by sending the material to the originating
function while Appeals retains jurisdiction of the case and proceeds with resolution of
other issues. However, if it appears that important new information or evidence was
purposely withheld from the originating function, the entire case should be returned to
the originating function and jurisdiction relinquished pursuant to IRM 8.2.1.2.2(3). The
taxpayer/representative must be notified when a case is returned to the originating
function or new material not available during initial consideration has been sent to the
originating function. The results of the originating function’s review of the new
information will be communicated to the taxpayer/representative.
Q-7 Does the prohibition on ex parte communications have any impact on the
relationship between Appeals and Counsel?

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A-7 Chief Counsel is the legal adviser to the Commissioner of Internal Revenue and
his or her officers and employees on all matters pertaining to the administration and
enforcement of the internal revenue laws and related statutes. Chief Counsel’s
authority encompasses the provision of comprehensive legal advice to IRS employees,
including employees in the Appeals organization, relating to the enforcement and
administration of such laws. The prohibition on ex parte communication does not
preclude Chief Counsel attorneys from advising Appeals Officers of the legal position of
Chief Counsel on specific questions of law, assisting Appeals Officers in
comprehending or interpreting specific legal authorities or otherwise providing legal
assistance to Appeals Officers in the course of their duties. Appeals Officers are
cautioned, however, that while they may obtain legal advice from the Office of Chief
Counsel, they remain responsible for independent evaluation of the strengths and
weaknesses of specific issues or positions in the case, or of the case as a whole, and
for making independent judgments concerning the hazards of litigation. The prohibition
on ex parte communications will have no impact on the procedures in Rev. Proc. 87-24,
1987-1 C.B. 720, or subsequent procedures relating to the administration of the
Appeals process for cases docketed in the United States Tax Court.
Q-8 Appeals is required to submit certain cases to the Joint Committee on
Taxation for review. On occasion, the Joint Committee will question a settlement
or raise a new issue. Are communications with the Joint Committee covered by
the ex parte communications prohibition?

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A-8 No. The prohibition applies only to communications between the Appeals Officer
and other Internal Revenue Service employees.
Q-9 Does the prohibition on ex parte communications have any impact on the
requirement that ISP issues in cases in Appeals jurisdiction be reviewed and
approved by the Appeals ISP Coordinator?
A-9 No. Existing procedures for review and approval remain in place. The Appeals
ISP Coordinator serves as a resource person for all Appeals Officers. The purpose of
the review is to ensure consistency of settlements and adherence to approved
settlement guidelines. Communications between the Appeals Officer and the Appeals
ISP Coordinator are entirely internal within Appeals, and consequently, the ex parte
communications prohibition does not apply.
Q-10 Delegation Order 247 gives Examination case managers limited settlement
authority to resolve ISP coordinated issues which have Appeals Settlement
Guidelines, provided that they secure the review and approval of both the
Examination and Appeals ISP Coordinators. Would such communications
constitute a violation of the ex-parte communications prohibition?
A-10 No. The purpose of the review is to ensure that the resolution by Examination fits
within the guidelines developed by Appeals and that the application of the guidelines is
consistent. The role of the Appeals ISP coordinator is directive in nature and has no
impact on the independence of Appeals Officers.

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Q-11 Does the prohibition on ex parte communications come into play in the
context of meetings which include representatives from Appeals, Counsel,
Collection and Examination (ACCE meetings), industry wide ISP coordination
meetings, or meetings of Compliance Councils or the Large Case Policy Board?
A-11 Meetings of this type may include general discussions of how to handle technical
issues or procedural matters, but these discussions are generally not case specific.
Therefore, the prohibition on ex parte communications would not apply. Similarly, the
prohibition would not apply to discussions relating to cases which are not under
Appeals jurisdiction. However, if a case-specific discussion arises on a case which is
open in Appeals jurisdiction, the discussion should be postponed. Appeals must
provide the taxpayer/representative with an opportunity to participate when an Appeals
Officer engages in any case-specific discussion with the originating office which
addresses the strengths and weaknesses of an issue or position in a specific case that
is open in Appeals jurisdiction.
Q-12 Does the ex parte communications prohibition apply to Appeals
consideration of cases which originated in the Collection function, e.g.,
collection due process (CDP) appeals, collection appeals program (CAP) cases,
offers in compromise, trust fund recovery penalty cases, etc.?
A-12 Yes. The principles discussed in A-2, A-5 and A-6 above apply to discussions
between Appeals Officers and Collection Division employees. The Appeals Officer
may inquire about how the originating function reached its decision and the manner in
which the law was applied if such information is not clear in the administrative file. The

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Appeals Officer may also ask whether certain information was requested and whether it
was received. The Appeals Officer, however, may not engage in discussions of the
strengths and weaknesses of the issues and positions in the case, which would appear
to compromise the Appeals Officer’s independence. Any discussion of the strengths
and weaknesses relating to the proposed action requires that the
taxpayer/representative be given an opportunity to participate in the discussion.
Section 3401 of RRA 98, regarding due process in IRS collection actions, states that at
a hearing, the Appeals Officer must obtain verification “that the requirements of any
applicable law or administrative procedure have been met.” Communications seeking
to verify compliance with legal and administrative requirements are similar to the
general or clarifying inquiries discussed in A-2 above. Therefore, such
communications are not subject to the prohibition on ex parte communications.
Q-13 Does the prohibition on ex parte communications have any impact on
Appeals Officer communications with the Office of the National Taxpayer
Advocate (ONTA) on an open case?
A-13 Communications by an Appeals Officer with the ONTA that are initiated by the
ONTA are not subject to the prohibition because the Appeals Officer may assume that
the ONTA is acting at the request, and with the consent, of the taxpayer.
Q-14 Is the prohibition on ex parte communications limited to oral
communications?
A-14 No. The prohibition is not limited to oral communications. It applies to any form
of communication, oral or written (manually or computer generated).

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Q-15 Several responses in this document refer to the taxpayer/representative
being given an “opportunity to participate.” What does this phrase mean?
A-15 It means that the taxpayer/representative will be given a reasonable opportunity
to attend a meeting or be a participant in a conference call with the Appeals Officer and
the originating function when the strengths and weaknesses of issues or positions in
the taxpayer’s case are discussed. The taxpayer/representative will be notified of a
scheduled meeting or conference call and invited to participate. If the
taxpayer/representative is unable to participate at the scheduled time, reasonable
accommodations will be made to reschedule. This does not mean that the Service will
delay scheduling a meeting for a protracted period of time to accommodate the
taxpayer/representative. Facts and circumstances will govern what constitutes a
reasonable delay.
Q-16 What if the taxpayer/representative declines to participate or seeks to delay
the meeting/conference call beyond a reasonable time?
A-16 The Appeals Officer should document the taxpayer/representative’s declination
or the reason for proceeding in the absence of the taxpayer/representative. This could
be accomplished by an entry in the Case Activity Record and a letter to the
taxpayer/representative.
Q-17 The IRM provides for computational review within 120 days of a team case
being assigned. If this review reveals computational errors affecting the
proposed tax liability, can the Appeals Officer discuss these errors with
Examination without violating the prohibition on ex parte communications?

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A-17 If the error involves the interpretation of a legal principle or application of the law
to a particular set of facts, the taxpayer/representative should be afforded the
opportunity to participate in any scheduled meetings with Examination to discuss the
discrepancy. In such cases, there may be instances where the best approach is for
Appeals to return the case to Examination for further development and correction.
However, if the discrepancy is purely mathematical, any discussion would likely be
informational only, and no violation of the prohibition is likely. Both the
taxpayer/representative and Examination would be advised before a mathematical
correction is made.
Q-18 What impact does the prohibition on ex parte communications have on pre-
conference meetings with Examination on team cases?
A-18 This is clearly a situation where the intended communications could appear to
compromise the independence of Appeals Officers. Pre-conference meetings should
not be held unless the taxpayer/representative is given the opportunity to participate.
Q-19 Does the prohibition on ex parte communications apply to post-settlement
conferences with Examination?
A-19 No. The post-settlement conference with Examination is intended to inform
Examination about the settlement of issues and to supply information that may be
helpful in the examination of subsequent cycles. Appeals’ objective is to ensure that
Examination fully understands the settlement and the rationale for the resolution. In
addition, the conference provides an opportunity for Appeals to discuss with
Examination the application of Delegation Orders 236 and 247 (i.e., settlement by

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Examination consistent with prior Appeals settlement or ISP settlement guidelines) to
issues settled by Appeals. Because the tax periods before Appeals have been
finalized, discussion of the resolution of issues present in those periods does not
jeopardize the independence of Appeals. As long as there is no discussion of new
issues not previously considered by Appeals, the post-settlement communication is not
subject to the prohibition on ex parte communications.
Q-20 Does the prohibition on ex parte communications alter existing procedures
for handling claims filed late in the Appeals process?
A-20 There is no change to existing procedure. The claim should be referred to the
originating function with a request for expedited examination. Because such a referral
is in the nature of a ministerial act and involves no discussion by Appeals with
Examination about the strengths and weaknesses of the issue, the referral is not
subject to the prohibition.
SECTION 4. EFFECTIVE DATE
This revenue procedure is effective for communications between Appeals Officers and
other Internal Revenue Service employees which take place after the date this revenue
procedure is published in the Internal Revenue Bulletin in final form.
DRAFTING INFORMATION
The principal author of this revenue procedure is David M. Geber of the Office of
Corporate and Individual Income Tax, National Office Appeals. For further information
regarding this revenue procedure, contact Mr. Geber at (202) 694-1827 (not a toll free
number).