The IRS has established a new Fast-Track Settlement program for small businesses in Revenue Procedure 2017-25. The program, referred to as the Small Business/Self Employed Fast Track Settlement program (SB/SE FTS), had previously been a pilot program, initially established by Announcement 2006-61, later extended and modified by Announcements 2008-110 and 2011-5. The program deals with taxpayers under the authority of the Small Business/Self Employed (SB/SE) division of the IRS.
The Revenue Procedure explains:
SB/SE and Appeals jointly administer SB/SE FTS. SB/SE FTS is available to expedite case resolution at the earliest opportunity within the SB/SE Field and Specialty Examination functions. See IRM 22.214.171.124.1, Examination-Field Areas, and IRM 126.96.36.199.3, Specialty-Examination. SB/SE taxpayers that currently have unagreed issues in at least one open year under examination can work together with SB/SE and Appeals to resolve outstanding disputed issues while the case is still in SB/SE jurisdiction and preserve the taxpayer’s ability to request an Appeals hearing. SB/SE FTS can be used to resolve both factual and legal issues, and may be initiated at any time after an issue is fully developed. An issue cannot be fully developed prior to the receipt of all necessary referrals, technical advice, Counsel advice, valuation reports, or other relevant documentation. It is a goal of SB/SE FTS that the entire process be completed within 60 days after acceptance into the program.
The procedure outlines the following significant changes made to the pilot program previously governed by Announcement 2011-5.
- SB/SE FTS is now available to taxpayers nationwide. See News Release IR-2013-88.
- SB/SE FTS is no longer available for cases under the jurisdiction of the Tax Exempt and Government Entities (TE/GE) Division as a result of the establishment of a permanent, separate fast track settlement program for TE/GE taxpayers. See Announcement 2012-34, 2012-36 I.R.B. 334, Fast Track Settlement for TE/GE Taxpayers.
- The procedure modifies the case eligibility criteria by requiring that the issues remain unresolved after the involvement of the Group Manager.
- The procedure modifies the criteria for cases excluded from SB/SE FTS by:
- Providing that SB/SE FTS is generally not available for cases in which SB/SE FTS is not appropriate under either 5 U.S.C. § 572 or 5 U.S.C. § 575.
- Adding a good faith requirement that incorporates the failure to respond or provide documentation provision in Announcement 2011-5.
- Removing the reference to issues under consideration for designation for litigation and providing that SB/SE FTS is not available for issues docketed in any court.
- Providing that SB/SE FTS is not available for issues precluded from settlement by previous closing agreements, res judicata, or controlling Supreme Court precedent.
- Providing that SB/SE FTS is not available for issues for which SB/SE FTS would not be in the interest of sound tax administration.
- Updating the provision relating to issues for which the taxpayer has submitted a request for competent authority assistance.
- Clarifying that “whipsaw” issues include issues on a joint return where both spouses do not agree to participate in the same FTS Session or where a spouse is claiming innocent spouse treatment under section 6015.
- Consistent with Rev. Proc. 2014-63, 2014-53 I.R.B. 1014, the procedure indicates that taxpayers availing themselves of SB/SE FTS are ineligible to use post-appeals mediation for any issue considered during the SB/SE FTS process if the parties fail to resolve the issue or if either party withdraws after the start of the SB/SE FTS Session.
Subject to specific limitations, SB/SE FTS is available for cases in SB/SE jurisdiction if:
- The case contains disputed factual or legal issues;
- Issues are fully developed; and
- The issues remain unresolved after the involvement of the Group Manager.
However, cases that include any of the following issues are excluded from SB/SE FTS:
- Cases in which SB/SE FTS is not appropriate under either 5 U.S.C. § 572 or 5 U.S.C. § 575, which provide the general authority and guidelines for use of alternative dispute resolution in the administrative process;
- Cases in which the taxpayer did not act in good faith during the audit process, such as, but not limited to, cases in which the taxpayer failed to cooperate or unduly delayed the audit process;
- Correspondence examination cases worked solely in a Campus/Service Center site;
- Partnership cases under the Tax Equity & Fiscal Responsibility Act (TEFRA);
- Collection cases. Examples include, but are not limited to, Collection Due Process, Collection Appeals Program, Offer-In-Compromise and Trust Fund Recovery Penalty cases;
- Issues designated for litigation;
- Issues docketed in any court;
- Issues precluded from settlement by previous closing agreements, res judicata, or controlling Supreme Court precedent;
- Issues for which SB/SE FTS would not be in the interest of sound tax administration. For example, issues common to issues in litigation for which it is important that the IRS maintain a consistent position, or issues common to issues in litigation over which the Department of Justice has jurisdiction;
- Frivolous issues, such as, but not limited to, those identified in section 6.10 of Rev. Proc. 2016-1, 2016-1 I.R.B. 1, or the corresponding provision of any successor guidance;
- “Whipsaw” issues, or issues for which resolution with respect to one party might result in inconsistent treatment in the absence of participation of another party. Examples include, but are not limited to, issues on a joint return where both spouses do not agree to participate in the same FTS Session (see section 6.02 of this revenue procedure) or where one spouse is claiming innocent spouse treatment under section 6015;
- Issues for which the taxpayer has submitted a request for competent authority assistance;
- Issues outside SB/SE jurisdiction; or
- Issues that have been otherwise identified in subsequent guidance issued by the IRS as excluded from the SB/SE FTS process.
A taxpayer who is interested in SB/SE FTS is instructed to contact the SB/SE Examiner or Group Manager for the year under examination. As well, the Examiner or Group Manager may initiate the suggestion that the case be moved to SB/SE FTS. The process can be initiated at any time after the issue is fully developed.
Both parties must consent to SB/SE FTS. If they agree, both the Examiner and the taxpayer complete Form 14017, Application for Fast Track Settlement. The documentation package that accompanies the form will include the Examiner’s properly documented workpapers and the taxpayer’s written response. The package is submitted to the Group Manager who determines if the package is complete and if the case is suitable for SB/SE FTS.
If the package is approved, it will be forwarded to the local Appeals Team Manager who will again review the package, determine if the case meets the eligibility requirements and decide whether to accept the case into SB/SE FTS. A decision not to accept the case into SB/SE FTS is not subject to appeal or judicial review.
The program will make use of various alternative dispute resolution techniques to attempt to resolve the case. The FTS Appeals Official will serve as a neutral mediator to attempt to resolve the issues between the parties.
The FTS Appeals Official has the right to propose settlement terms on any or all issues, including considering settlement terms proposed by either party. If the taxpayer accepts the proposal but the Group Manger rejects it, the SB/SE Territory Manager must review that rejection and decide whether to accept or overturn it.
For matters not resolved during SB/SE FTS the taxpayer may still take the dispute to traditional appeals. However, post-appeals mediation is not available for any issue considered during the SB/SE FTS process.
Generally, either party may withdraw from the process at any time before settlement is reached, but withdrawing from any single issue under SB/SE FTS consideration will have the effect of withdrawing from all issues under SB/SE FTS consideration at the time of withdrawal.
The procedure contains provisions governing issues related to ex parte communications and confidentiality and disclosure in Section 8. As well, the procedure provides that any settlement reached in SB/SE FTS will not be treated as precedent and binding on the parties for any years or issues not under the SB/SE FTS agreement.
The program was made effective on the date of publication (March 20, 2017).