[Date]
[Appeals Officer or Settlement Officer name], IRS Independent Office of Appeals
[Address or secure messaging / fax]
cc: [Appeals Team Manager name], Appeals Team Manager
Re: Objection to prohibited ex parte communication and request for remedy under Rev. Proc. 2012-18, section 2.10
Taxpayer: [Client name] TIN: [SSN or EIN]
Type of case: [Non-docketed income tax appeal of 30-day letter dated [date] / CDP hearing under IRC 6330 on Form 12153 filed [date] / CAP appeal on Form 9423 filed [date]] Tax periods: [Periods]
Appeals case or work unit number: [Number, if known]
Dear [Mr./Ms. Name]:
I represent the taxpayer under the Form 2848 on file. On [Date], [while reviewing the case file provided under IRC 7803(e)(7) / during our conference / in your letter dated [date]], I learned of a communication between Appeals and [the revenue officer / the examining agent / the campus function] in which the taxpayer was given no opportunity to participate. The taxpayer objects to that communication as prohibited by Rev. Proc. 2012-18 and asks for the remedy described in section 4 below.
1. The communication
[Describe it specifically, for example: A two-page memorandum from Revenue Officer [name or ID], dated [date], placed on top of the administrative file transmitted to Appeals on [date], which states the officer's opinion that the taxpayer 'has no intention of paying' and recommends that Appeals sustain the levy. / An email from the examining agent to you dated [date], reflected in the case activity record, describing the taxpayer's representative as uncooperative during the examination. / A telephone conference between you and the group manager on [date], noted in the activity record, in which the strengths of the government's position on [issue] were discussed.] A copy of the document, or of the activity record entry, is enclosed as Exhibit A. The taxpayer was not told of the communication at the time, was not given a copy, and was not invited to participate.
2. Why the communication is prohibited
Rev. Proc. 2012-18, section 2.01(1), defines an ex parte communication as a communication between an Appeals employee and employees of other IRS functions “without the taxpayer/representative being given an opportunity to participate in the communication,” and section 2.03(1) prohibits such communications with an originating function to the extent they appear to compromise Appeals’ independence. The communication described above is not a ministerial, administrative or procedural matter within section 2.03(2). It falls within section 2.03(3), which lists as prohibited [choose the subsection(s): (a) discussions about the accuracy of the facts presented by the taxpayer; (b) discussions of the merits of authorities cited in the protest or report; (c) discussions of the originating function's perception of the demeanor or credibility of the taxpayer or representative; (d) views on the taxpayer's level of cooperation; (e) views on the strengths and weaknesses of the case; (f) communications advocating a result or objecting to a potential resolution].
[If the communication was in the transmittal or inserted into the file: Section 2.03(4)(b) provides that the transmittal memorandum or similar document 'should not include statements or comments intended to influence Appeals' decision-making process,' and that if it does, 'the document must be shared by the originating function with the taxpayer/representative at the time that the administrative file is sent to Appeals.' That did not occur. Section 2.03(4)(d) likewise prohibits placing in the file notes or memoranda that would not normally be included if the purpose is to influence Appeals.]
[If the communication came from Counsel: Section 2.06(1) provides that Appeals should not communicate ex parte about an issue with a field attorney who personally advised the originating function on the same issue in the same case, and IRC 7803(e)(6)(B) directs that legal advice to Appeals come, to the extent practicable, from Counsel staff not involved in the case or in preparing it for litigation. The advice at issue went beyond legal analysis to [describe].]
[If a CAP case: Under IRM 8.24.1.3.8, communications between Appeals and other IRS employees in a CAP case 'are strictly limited to ministerial, administrative, or procedural matters, and the merits of the case cannot be discussed.']
3. The communication compromises the independence of the review
The communication went to [the credibility of the taxpayer / the merits of the disputed issue / the result the originating function wants], which is the category of communication the Tax Court has found requires a new hearing. In Drake v. Commissioner, 125 T.C. 201 (2005), a memorandum questioning the credibility of the taxpayer’s counsel, sent to the settlement officer without notice to the taxpayer, led the court to remand “for a new section 6330 hearing with an independent Appeals officer who has received no communication relating to the credibility of petitioner or petitioner’s representative.” In Industrial Investors v. Commissioner, T.C. Memo. 2007-93, the court rejected the argument that a revenue officer’s cover letter was harmless: “Actual influence isn’t required, only a reasonable possibility that the prohibited communication may have compromised the Appeals officer’s impartiality.” In Moore v. Commissioner, T.C. Memo. 2006-171, the court held that nothing in RRA 98 or the revenue procedure “allows respondent’s Appeals officer to avoid the rule against prohibited ex parte communications by later informing the taxpayer about the communications.”
4. Remedy requested
Section 2.10(1) of Rev. Proc. 2012-18 provides that Appeals “shall notify the taxpayer/representative of the breach and request input from the taxpayer/representative regarding the appropriate remedy,” and that the available remedies include “reassigning the case to a different Appeals/Settlement Officer who has had no prior involvement in the case.” The taxpayer’s input is as follows:
- Reassign the case to an Appeals [Officer / Settlement Officer] who has had no prior involvement and who has not seen the communication, with the communication and any reference to it removed from the file provided to that officer;
- Refer the determination of the remedy to the second-level manager as section 2.10(1) requires, and tell me in writing who decided and what was decided;
- Provide the taxpayer with a copy of every other communication received from [the originating function] about this case, including the transmittal, any rebuttal to the protest, emails and activity record entries, so the taxpayer can respond to each in writing or at the conference;
- [If a specified taxpayer under IRC 7803(e)(7): Provide the nonprivileged case file on the disputed issues, including the Appeals case activity record to date, at least 10 days before any rescheduled conference, as IRC 7803(e)(7) and IRM 8.6.1.2.1 require. The taxpayer's adjusted gross income for [year] was $[amount] / gross receipts were $[amount].]
Disclosure alone is not an adequate remedy where, as here, the communication concerned [credibility / the merits]. The taxpayer does not waive the objection by continuing to participate in the hearing, and [in a CDP case: asks that this letter and Exhibit A be included in the administrative record so the issue is preserved for review under IRC 6330(d).]
Please confirm receipt and let me know the date by which Appeals will respond. Thank you.
Sincerely,
[Representative name, credential]
[Firm, address, phone, fax, email]
CAF [CAF number]
Enclosures: Exhibit A (copy of the communication or activity record entry); [Exhibit B: correspondence showing the taxpayer was not notified]; Form 2848.
When to send it
Rev. Proc. 2012-18 governs communications between Appeals and the originating function (Examination, Collection and the campus functions) in any case Appeals reviews, whether it arrived by protest, CDP request or CAP; the rules are explained at ex parte rules in Appeals. The letter is for the moment you can point to a specific communication. Section 2.10(1) makes the taxpayer’s input part of the process: Appeals “shall notify the taxpayer/representative of the breach and request input from the taxpayer/representative regarding the appropriate remedy.” Send it before the conference where possible; after an adverse determination the request for reassignment is weaker.
Finding the communication
Breaches live in the file; in Industrial Investors the taxpayer found the revenue officer’s cover letter by reading the Appeals officer’s case activity record. A specified taxpayer (adjusted gross income of $400,000 or less, or gross receipts of $5 million or less, for the year in dispute) is entitled under IRC 7803(e)(7) to the nonprivileged case file on the disputed issues “not later than 10 days before the date of such conference,” and IRM 8.6.1.2.1.2 says “The file must include all workpapers relevant to the disputed issues,” including portions of ICS or AMS histories the officer accessed. For everyone else, IRM 8.6.1.2.1.1 has Appeals respond directly to a file request under disclosure procedures, and a FOIA request remains available. Read the transmittal (the T-letter, or Form 15044 in a CAP case), any rebuttal to the protest, and every activity record entry noting a call or email with the originating function.
Matching it to the revenue procedure
Section 2 of the letter does the matching. The prohibited categories in section 2.03(3) are the accuracy of the facts, the merits of cited authorities, “the originating function’s perception of the demeanor or credibility of the taxpayer or taxpayer’s representative,” the level of cooperation, the strengths and weaknesses of the case, and advocacy for a result. The transmittal rule in section 2.03(4)(b) is the one most often broken: the transmittal “should not include statements or comments intended to influence Appeals’ decision-making process,” a neutral list of unagreed issues is fine, and if the line is crossed “the document must be shared by the originating function with the taxpayer/representative at the time that the administrative file is sent to Appeals.” In CAP cases IRM 8.24.1.3.8 goes further: communications “are strictly limited to ministerial, administrative, or procedural matters, and the merits of the case cannot be discussed.”
Counsel is different. The rules do not apply between Appeals and Counsel in a docketed case, and Appeals may obtain legal advice in any case. The objection is narrower: section 2.06(1) bars ex parte contact with a field attorney who “personally provided legal advice regarding the same issue in the same case to the originating function,” and IRC 7803(e)(6)(B) directs that advice come from Counsel staff “who were not involved in the case with respect to which such assistance and advice is sought and who are not involved in preparing such case for litigation,” to the extent practicable.
The remedy and who decides
The revenue procedure says most breaches “may be cured by timely notifying the taxpayer/representative of the situation, sharing the communication or information in question, and affording the taxpayer/representative an opportunity to respond,” with reassignment as an additional remedy in Appeals’ sole discretion, and “The deciding official for the determination of the appropriate remedy for a breach of the ex parte communication rules will be a second-level manager.” The letter therefore copies the Appeals team manager, asks for the second-level decision in writing, and explains why disclosure is not enough.
The three Tax Court cases are the reason to insist on reassignment where credibility or the merits were discussed. All were CDP cases reviewed for abuse of discretion, and each ended in a remand for a new hearing before a different officer who had not seen the communication; Moore adds that independent grounds for the determination do not moot the breach, and that a taxpayer raising only frivolous arguments may get no relief. The rules “do not create substantive rights affecting the taxpayer’s tax liability,” so the letter asks for an impartial hearing, not for the deficiency or levy to be set aside. In a CDP case section 2.10(2) confirms the Tax Court “may remand the case to Appeals for either a new or a supplemental hearing,” which is why the letter asks to be placed in the administrative record. The file requests in section 4 rest on section 2.01(3)(b): the taxpayer is to be “furnished a copy of the written communication and given a chance to respond to it either orally or in writing.” See the Appeals conference for file access timing.
Where to send it and what happens next
- Address the letter to the Appeals Officer or Settlement Officer, copy the Appeals Team Manager named in the acknowledgment letter, and send it by the method Appeals has used with you, keeping proof of transmission.
- Ask that the conference be postponed until the remedy is decided and the file is provided.
- Expect a written determination of the breach and the remedy from the second-level manager. If the case is reassigned, confirm that the new officer’s file does not contain the communication.
- If Appeals declines any remedy in a CDP case, the objection and Exhibit A are in the record for the Tax Court; see Tax Court petitions. In a deficiency case the Tax Court decides the liability itself, so the practical remedy is the administrative one.
Mistakes
- Objecting to permitted communications. Locating a document, status checks and, in CDP cases, verifying that legal requirements were met are within section 2.03(2).
- Vague allegations. A statement that the officer seems to have talked to the examiner gives the second-level manager nothing to decide. Quote or enclose the communication and date it.
- Accepting disclosure as the cure for a credibility communication. Moore holds that later informing the taxpayer does not satisfy the rule; ask for reassignment and say why.
- Treating a Fast Track contact as a breach. In Fast Track Settlement the Appeals official is not acting in the traditional Appeals role and the rules do not apply (sec. 2.05).
Questions practitioners ask
Does a breach void the notice of deficiency or the levy?
No. Section 2.10(1) says the rules do not create substantive rights affecting the tax liability or the IRS’s ability to determine, assess or collect it. The remedy is disclosure, a chance to respond, and reassignment or, in CDP cases, a court-ordered new hearing.
Who decides whether the case is reassigned?
Appeals, in its sole discretion, with the decision made by a second-level manager after considering the taxpayer’s input. That is why the letter copies the Appeals Team Manager and asks for the decision in writing.
Is the administrative file itself an ex parte communication?
No. Section 2.03(4)(a) says the file transmitted by the originating function is not one. The transmittal, and anything inserted into the file to influence Appeals, must be shared with the taxpayer when the file is sent.