Key Takeaways from Crowell & Moring’s 38th Annual Managing Tax Audits and Appeals Seminar

On October 24, 2024, Crowell & Moring LLP hosted its 38th Annual Managing Tax Audits and Appeals Seminar. The seminar featured several prominent IRS speakers and lively discussion among clients, including conversations about the following hot topics:

IRS Audit and Enforcement Updates

Holly Pax, Commissioner of the Large Business and International Division and Mark Nyman, Director, Corporate Issues and Credits, LB&I Enterprise Activities, discussed the IRS’s teams of specialists, which are being used to centralize risk assessments for complex, labor intensive issues, such as transfer pricing, research credits, and mergers and acquisitions.

• Transfer Pricing
  • • LB&I is establishing a dedicated team to track transfer pricing issues that arise in real-time audits of companies participating in its compliance assurance program (CAP).
      • • Paz shared that the establishment of a team focused on transfer pricing will allow issues to be elevated more quickly.
        • The team will be comprised of current employees in LB&I’s treaty and transfer pricing operations practice area.
  • Section 41 Research Credit
    • • Nyman said that the IRS has centralized risk assessments of taxpayers who claimed a research credit, using a team of subject matter experts. In the past, research issues have taken a significant amount of IRS resources, so the centralized process will reduce the IRS’s workload and allow the IRS to focus on cases that have compliance risk.
      • A revised Section 41 research credit form is expected in early 2025.
      • Paz explained that the IRS considered stakeholder comments and, as a result, made changes to an earlier version of the form.
  • Mergers and Acquisitions
    • • Nyman shared that centralized risk assessments of taxpayers engaged in M&A transactions has reduced the number of M&A transactions being worked in the field. He said that examiners in the field must now get prior approval from the group of subject matter experts prior to working an M&A issue.

IRS Independent Office of Appeals Updates

Liz Askey, Chief of the Independent Office of Appeals, discussed Post-Appeals mediation, the Fast Track Settlement Program, the new ADR Program Management Office, digital messaging, de-coordination of issues, and regulations challenges. 

• Askey encouraged all taxpayers to consider post-appeals mediation. Ms. Askey provided that access to post-appeals mediation is routine and all taxpayers should be able to pursue mediation moving forward. She recommended that taxpayers elevate issues, as needed, generally and specifically as related to post-appeals mediation.  
• The Fast Track Settlement program saw a 56% jump in case receipts in FY24.
• Significant hiring efforts continue for technical employees, including Appeals Officers and Settlement Officers, with “direct hire” authority.
• The ADR Program Management Office is now operational with permanent staffing, and ongoing changes and pilots are in development.
• A new “Corporate Group Mailboxes” pilot program is available for large business taxpayers with multiple representatives, facilitating secure digital messaging and streamlined communications.
• Several issues have been de-coordinated.  Appeals Subject Matter Experts are available to assist on about 140 types of issues.
• The Office of Appeals cannot apply litigating hazards to a taxpayer’s argument that a Treasury regulation is invalid unless there is an unreviewable decision from a Federal court invalidating the regulation.

We enjoyed seeing many of our clients at the Seminar!