Opportunity to Improve the LB&I Examination Process

LB&I is evaluating several critical aspects of the recently adopted LB&I Examination Process and is seeking input from TEI members to help improve the process.  We’ve listed three areas of inquiry below.  Please email your thoughts—no matter how informal or undeveloped—to Patrick Evans, TEI’s Chief Tax Counsel, at pevans@tei.org.  We will compile the input, revise it to ensure consistency, and remove any identifying information.  LB&I has requested our input by July 1, but we would appreciate hearing from you even if you cannot respond by that date. 

This is your opportunity to transform your thoughts into action, and we encourage you to take advantage of it.  We look forward to hearing from you soon!

  • Metrics - How can LB&I best measure the effectiveness of the new examination process?  Metrics could include quantitative measures such as number of exams concluded in the period prescribed in the audit plan, IDR response time, number of unagreed issues, etc.  More qualitative metrics could also be employed such as post-exam surveys of taxpayers and exam teams. 
  • Acknowledgement of Facts (AOF) – How can this process be more effective?  The LB&I Examination Process introduces a new process where the IRS prepares a description of facts associated with a tax issue and presents them to the taxpayer for “acknowledgement.”  The goals of the process are to ensure there is a mutual understanding of the relevant facts between the exam team and the taxpayer and, if an unagreed issue goes to Appeals, to ensure the issue can be fully evaluated without having to return it to exam for further factual development.  LB&I is seeking comments and ideas that would provide the desired factual understanding without raising taxpayer concerns experienced with the existing AOF process, e.g., facts are intrinsically related to legal theories which are often unagreed; potential impact of the AOF on litigation outcomes.  Two specific questions in which LB&I is interested are:  Would it be helpful if the IRS adopted a policy that the AOF will not be introduced in any court proceeding?  Can the form of the AOF be modified to mitigate taxpayer concerns?
  • IRS Team Coordination and Communication – How can LB&I improve timeliness and transparency for the taxpayer when several IRS personnel are involved?  In the new LB&I Examination Process, a taxpayer may have multiple issue teams staffed with examining agents, as well as a variety of specialists ( international agents, computer audit specialists, economists, experts in financial transactions, etc.).  IRS Counsel may also be involved and sometimes outside experts are retained by the IRS.  These individuals often report to different managers.  The new “Campaign” process also means that a taxpayer may be subject to one or more IRS teams assigned to particular Campaign issues, in addition to its regular exam team.  Taxpayers have expressed concern that they may not know who is working on their case and they may not know who is the “decision maker” on a particular issue.  Taxpayers are also concerned that the various players will not be coordinated and this could lead to difficulties and delays in closing a case.

LB&I has requested feedback on whether taxpayers are actually experiencing these issues, as well as suggestions on how to improve coordination and communication.  Although the Campaign process is new, LB&I is particularly interested in taxpayer experience coordinating Campaign teams and conventional exam teams.