part7-115
- 7.40.1.1
IIR Program Design, Process, and Responsibility - 7.40.1.2
IIR Project Selection - 7.40.1.3
IIR Planning and Organization
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The Industry Issue Resolution (IIR) Program is designed to address frequently
disputed or burdensome tax issues that affect a significant number of business
taxpayers through the issuance of published guidance or administrative guidance.
The issues addressed are selected from issues suggested by taxpayers, representatives,
associations, and other interested parties. For each issue selected for the
program, a resolution team, generally composed of IRS, Chief Counsel and Treasury
personnel, is assembled to gather and analyze relevant information and recommend
a resolution of the issue.
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IIR was designed as part of IRS’s issue management strategy to
resolve the tax treatment of frequently disputed issues rather than resolving
them on a case-by-case basis in traditional post-filing examinations. To test
the viability of the IIR design, IRS’s Large and Mid-Size Business Division
(LMSB) authorized a pilot program. The pilot was announced in Notice 2000-65
on December 6, 2000, inviting interested parties to suggest issues for the
program. Issues were selected and IIR teams were formed to recommend guidance.
The resulting published guidance resolved tax issues that otherwise would
have required thousands of tax examinations. -
The IIR pilot program was evaluated and determined to be a success.
On April 9, 2002, Notice 2002-20 announced that the IIR program was being
made permanent and was expanded to include issues raised by Small Business/Self-Employed
(SB/SE) taxpayers. This Notice was later superseded by Revenue Procedure 2003-36.
Revenue Procedure 2003-36 revised program procedures to allow issues to be
submitted at any time for possible resolution.
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The goal of the IIR Program is to issue guidance on frequently disputed
business tax issues that establishes a consistent position and reduces administrative
burden for IRS and taxpayers. The IIR process is designed to be expeditious
and foster communications between the IRS and outside stakeholders. The IIR
process consists of three stages with required actions or steps to ensure
guidance is issued in a timely manner.-
Stage I: Issue Identification and Selection- This
stage consists of steps 1 through 3 of the IIR process. These steps include
identification of issues by external stakeholders, semi-annual screening and
selection of issues by internal stakeholders, and notification of issues reviewed
and selected for the program. -
Stage 2: Planning and Analysis – This stage consists
of steps 4 through 7 of the IIR process. These steps include activities pertaining
to planning and organization, fact finding and analysis, and recommendation
of a proposed resolution. -
Stage 3: Approval, Communication, and Evaluation -
This stage consists of steps 8 through 10 of the IIR process. These steps
include the clearance of the proposed guidance, communication of approved
guidance, and solicitation and evaluation of feedback on the IIR process.
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See Exhibit 7.40.1-1 for an illustration of the IIR process stages and
steps. -
The overall IIR program goal is to publish guidance as expeditiously
as possible with the optimal goal of within nine months of notification of
the IIR selection. However, target timeframes are set by each team and may
be shorter or longer depending on the complexity of the issue. -
While issues are being considered under the IIR program, examinations
of selected IIR issues are not to be suspended to await potential new guidance.
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LMSB and SB/SE Operating Divisions share operational responsibility
for the IIR program. Appeals, Chief Counsel and Treasury also have major roles
in the program. Executive oversight of this initiative is through the LMSB
Compliance Strategy Council, which includes representatives from LMSB, Appeals,
National NTEU, and, as appropriate, SB/SE. The Office of Pre-Filing and Technical
Services (PFTS) manages the program with the assistance of IIR Coordinators.
Many other stakeholders also have roles and responsibilities in an IIR. Exhibit
7.40.1-2. shows the roles and responsibilities of the various participants
in the IIR process.
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Additional IIR program information can be found at the following web
sites:Internal- LMSB Web Site
http://lmsb.irs.gov/hq/pftg
Select
“Industry Issue Resolution”External- IRS Digital Daily
http://www.irs.gov
Select
“Businesses”
Select
“Industry Issue Resolution
”
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The IIR program process begins with issue identification followed by
selection and notification of the IIR projects.
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Revenue Procedure 2003-36 provides procedures for submission of business
tax issues by taxpayers, representatives, associations, and other interested
parties for resolution under the IIR program. Issues may be submitted at any
time. The revenue procedure can be found at the IIR web sites listed at IRM
7.40.1.1.4. -
Business tax issues appropriate for IIR generally will have at least
two or more of the following characteristics:-
The proper tax treatment of a common factual situation is uncertain.
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The uncertainty results in frequent, often repetitive examinations of
the same issue. -
Uncertainty results in taxpayer burden.
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The issue is significant and impacts a large number of taxpayers either
within an industry or across industry lines. -
The issue requires extensive factual development, and an understanding
of industry practice and views concerning the issue would assist the Service
in determining the proper tax treatment.
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Tax issues that are not appropriate for IIR are:
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Unique to one or a small number of taxpayers.
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Primarily under jurisdiction of business operating divisions other than
LMSB and SB/SE. -
Transactions lacking bona fide business purpose or transactions with significant
purpose of improperly reducing or avoiding federal taxes. -
Involve transfer pricing or international treaties.
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Outreach efforts should be made by IRS (executives, technical advisors,
TEC tax specialists, revenue agents, etc.) to encourage outside stakeholders
to suggest problematic issues for resolution under IIR. -
No particular format is required for submission of issues. Each submission
should include a brief description of the proposed issue, an explanation of
why there is a need for guidance, information on the number of taxpayers impacted
by issue, contact information and may recommend a resolution to the issue.
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LMSB, SB/SE, Appeals, Chief Counsel and Treasury will review the issues
submitted at least semi-annually, generally after March 31st and August 31st
of each year. A determination will be made regarding whether the issue should
be selected for the IIR program and type of project (published guidance and/or
administrative guidance) to resolve the issue. The following are activities
that take place in screening issues and selecting IIR projects.
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Submissions of issues for inclusion in the IIR program are received
and controlled by the Office of Pre-Filing and Technical Services (PFTS) in
LMSB. Any issues clearly outside of LMSB and SB/SE jurisdiction will be excluded
from IIR consideration and the submitter will be notified by PFTS.
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PFTS will periodically post new submissions to the LMSB IIR intranet
web site for screening. Each issue will be summarized and posted with an IIR
Screening Questionnaire and the IIR guidance request. LMSB, SB/SE, Appeals
and Counsel personnel with knowledge of the issue or industry will review
the guidance request and complete the questionnaire by a designated deadline.
The questionnaire responses provide information on:-
whether the issue is appropriate for the program;
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current guidance and initiatives involving the issue;
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impact of the issue on taxpayers and IRS resources; and
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likelihood of reaching a resolution of the issue.
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PFTS will post a consolidated report from the questionnaire responses
to the LMSB IIR restricted web site to be accessed by designated LMSB, SB/SE,
Appeals, and Counsel executives and coordinators. -
Designated LMSB and SB/SE Executives will review the information gathered
and make recommendations on whether or not to select an issue for IIR. In
making their recommendations, the executive should state whether he/she is
the issue owner (has primary jurisdiction of taxpayers impacted by issue).
Informal coordination between LMSB and SB/SE executives should take place
when making this decision. For issues recommended, the determined issue owner
should also recommend the appropriate type of guidance project (published
or administrative). For issues not recommended, the determined issue owner
should briefly explain the reason for recommending non-selection. Responses
should be emailed to IIR@IRS.gov by the designated deadline.
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PFTS will prepare an executive report incorporating all recommendations.
LMSB and SB/SE Operating Division Executive committees will first independently
review the report of IIR submissions and recommendations. Issues recommended
will be ranked based on each business operating division’s priorities
and resources with a view of selecting issues drawn from diverse industries
or market segments. Division Counsel will assist in the review and prioritization. -
Following the prioritization of issues by the LMSB and SB/SE Operating
Divisions, the respective Executives will meet to discuss their recommendations
and should jointly reach an agreement on which issues should be sent forward
to Chief Counsel and Treasury for possible inclusion on the Treasury and IRS
Guidance Priority List (GPL). Generally, Appeals and Division Counsel will
also provide input on recommendations for IIR. Each business operating division
should also make a commitment as to what resources might be required for IIR
Administrative Guidance Projects. The respective business operating divisions
should agree upon and designate an owner for each of the issues selected for
IIR GPL or Administrative Guidance Projects.
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A prioritized list of issues recommended for the GPL is sent to Chief
Counsel and Treasury Assistant Secretary for Tax Policy. Factors considered
in recommending issues for the GPL include, among other things, recommendations
from other sources and whether the requested guidance promotes sound tax administration. -
The LMSB or SB/SE issue owner is notified by the Associate Chief Counsel
office with subject matter jurisdiction over the issue if the issue is selected
for the GPL. The issue owner then appoints an IIR Team Executive for the issue.
The IIR Team Executive should initiate a dialogue with the Associate Chief
Counsel with primary responsibility for the subject area to clarify the scope
of the issue, establish target completion date, and address any concerns. -
If an issue is not selected for the GPL, the Associate Chief Counsel
office will briefly explain the reason. In discussing the issue with Counsel,
the issue owner should address whether an IIR administrative guidance project
should be started and/or whether the issue be resubmitted at a later date.
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The issue submitter is notified by the LMSB or SB/SE issue owner (or
designee) whether the issue has been selected, and if not selected, the reason
for non-selection. For those issues selected, the executive should clarify
the type of IIR project to be started and begin discussing plans for the industry
orientation/meetings with the submitter. -
A news release will be issued to notify the general public of the IIR
requests and selections. Brief descriptions of all issues submitted and selections
(including type of project and contact information) will be included in the
news release. The news release will be posted to the web sites listed in section
7.40.1.1.2. When the GPL (or update) is issued, it will also list any IIR
published guidance projects included on the GPL. -
While the IIR project is in process, communications with outside stakeholders
and internal communications regarding the project should be approved by the
IIR team executive. -
Copies of the IIR guidance requests will be placed in the IRS Headquarters
FOIA Reading Room for public inspection and copying by interested parties
as provided in Revenue Procedure 2003-36. The IRS FOIA Reading Room is located
at 1111 Constitution Avenue, NW, Room 1621, Washington, DC. Requests for copies
of these documents can be faxed to the Reading Room (Fax number 202-622-5165).
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During the planning and organization process, an IIR team is formed
for each issue, orientation sessions are held for both the team and industry
concerning the IIR process, and a work plan is developed for addressing the
issue.
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The LMSB or SB/SE issue owner designates an
“IIR Team
Executive”
to provide oversight and leadership. The IIR Team Executive
will select an
“IIR Team Manager”
for the IIR team. The
IIR team manager is generally a LMSB or SB/SE Territory Manager. The executive
will work with the team manager to assemble the team. -
Additional team members generally will include (but are not limited
to) the following personnel:-
LMSB and/or SB/SE Field Person (Revenue Agent, Tax Specialist, Engineers,
etc.) -
LMSB and/or SB/SE Technical Advisor
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LMSB and/or SB/SE Division Counsel Attorney
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Issue Specialist Program (ISP) Appeals Officer
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Associate Chief Counsel Subject Matter Expert
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Treasury Office of Tax Policy Tax Specialist
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IIR published guidance teams will generally include at least one LMSB
or SB/SE field person, Appeals Officer/ISP, Associate Chief Counsel subject
matter expert, and an Office of Tax Policy Tax Specialist. IIR administrative
guidance teams will generally not include Associate Chief Counsel subject
matter experts or Treasury Office of Tax Policy Tax Specialists. -
Additional employees/specialists may be assigned to the team on a full
time or ad hoc basis as needed. The IIR team may also decide to secure the
services of outside experts. -
Selection of the Service’s team members is made by the IIR Team
Executive. IRS Bargaining Unit team members are identified in accordance with
the Letter of Understanding (LOU) with NTEU. Exhibit 7.40.1-3. -
Time should be charged by IIR Team Members as follows:
IIR Team Member IIR Time LMSB: Field personnel and Technical Advisors Activity code 527, Industry Issue Resolution Program LMSB: Managers Activity code 675, Compliance Outreach SB/SE: TEC Employees Strategy 6, OP1-Establish Burden Reduction Program (Project Type 06001) SB/SE: Compliance Field Employees Activity code 527, Industry Issue Resolution Program SE/SE Compliance Managers Activity code 675, Compliance Outreach Appeals Industry Specialization (line 6) Counsel Guidance project – IIR workload item -
The IIR team assignment is a collateral duty assignment (not a full
time position) for team members. However, it should be considered priority
work. If, as a result of participation in the IIR program, a Service employee
believes that an adjustment in his/her case inventory or workload may be required,
the employee should discuss this issue with his/her manager. Adjustments may
be made on a case by case basis.
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An IIR Team orientation/training session will be held to review and
start the IIR process. It is recommended that two days be planned for the
IIR team orientation. Following the IIR team orientation, an IIR industry
orientation session will be held to explain the IIR process, how outside stakeholders
will participate in the process, and receive feedback from industry. It is
recommended that an IRS facilitator be used for both the team and industry
orientations. Additional information to assist IIR teams can be found under
“Tool Kit for IIR Teams”
section of the LMSB IIR web site.
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The first part of the session should include the following IIR procedural
topics:-
IIR Process and Timeline
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Letter of Understanding with NTEU
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Roles and Responsibilities of IIR team members
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Establishing Ground Rules for the Team
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IIR Work Plan and Administrative Tasks
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Explanation of Federal Advisory Committee Act
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The IIR process, including the different stages and required tasks,
should be discussed at the team orientation. See Exhibit 7.40.1-1. -
The IIR targeted completion date established for the project and the
importance of meeting this date should be discussed. It is important for team
members to understand the priority nature of their assignment and the reason
for the aggressive timeline. While the timeline may require adjustment during
the IIR process depending on the complexity of the issue, the IIR process
must be expeditious to provide timely service to IRS customers.
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An overview of the provisions of the Letter of Understanding (LOU) with
NTEU should be provided to the SB/SE, LMSB, and Appeals bargaining unit team
members, who are covered by the LOU, during the team orientation. See Exhibit
7.40.1-3 for the LOU with NTEU.
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It is imperative that team members understand their roles and responsibilities
in the IIR process and the coordination required with internal and external
stakeholders. See Exhibit 7.40.1-2.
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Each IIR team executive will lead the team in establishing ground rules
for operating procedures, communications, and decision making processes.
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Team operating procedures should address how the team will operate:
meeting times and frequency, leave schedules, and travel and time reporting.
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The team should decide on how communications should be handled within
the team. Because team members may be stationed in different locations, care
should be taken to keep all team members informed of all activities. -
The team should decide how communications outside the team (other IRS
offices, other agencies, outside stakeholders) are to be handled. -
All contacts from the media should be referred through LMSB or SB/SE
Communications to IRS Media Relations.
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The Team Work Plan identifies the tasks of the team, the team member(s)
responsible for each task, and the time lines associated with the tasks. The
procedures provide an organized approach for planning and executing the tasks
of the IIR process. The Team Work Plan will be done in Excel format and contain,
for each action item, start date, estimated and actual completion date. The
Team Work Plan consists of two components, IIR Administrative Tasks (discussed
below) and Issue Work Plan (Discussed in IRM 7.40.1.3.4.2).
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Each IIR team will need to develop and follow a plan to establish responsibility
for the following administrative tasks set forth below.
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IIR team and industry meetings will be held throughout the IIR process.
The team will need to determine responsibilities and processes for conducting
meetings, preparing minutes and distributing the minutes.-
Conducting Meetings – The team may need to conduct meetings in a variety
of formats/locations, i.e., via conference calls, video conferencing, and
on-site meetings. These meetings work best when all parties have access to
the agenda and relevant documents to be discussed prior to the meeting. Teams
may want to have a facilitator initially or when contentious or complex issues
are being discussed. -
Recording Meetings-Notes of internal and external meetings should be taken
but do not need to be in-depth. It is suggested that agendas be prepared showing
the topics to be covered, by whom and purpose. Notes associated with the meetings
could then be used to confirm that the topics were covered, capture key points
raised and record planned actions and activities. A meeting recorder should
be designated. Specific taxpayer information should not be included, and personal
notes by team members, other than the recorder, should be kept to a minimum.
Actions and assignments should be reviewed at the end of the meeting to ensure
clarity.
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Each IIR team should determine early in the process when briefings should
be held with Chief Counsel, Treasury, Appeals, LMSB and SB/SE leadership and
Industry. Responsibility should be assigned to team members for setting up
and conducting briefings.
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The IIR team is responsible for completing the following reports:
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IIR Team Staffing Report – A listing of team members and their contact
information (Name, Title, Organization, Phone number, VMS and E-mail address)
This is a one time submission to be emailed to PFTS (IIR@irs.gov) at the beginning
of the process. Any changes are to be emailed to PFTS as they occur. -
IIR Team Work Plan – The work plan should be completed shortly after the
IIR Team Orientation and e-mailed to PFTS (IIR@irs.gov). It should be continuously
maintained by the team and updated as actions are completed. Any changes in
completion dates or additional tasks added should be explained in the IIR
team monthly status report. When the team has completed its work and guidance
has been issued, a final work plan should be emailed to PFTS. -
IIR Team Status – IIR Data Collection and Reporting System – A monthly
update on of the IIR teams resource expenditure and progress is required
on the IIR Data Collection and Reporting System. See Exhibit 7.40.1-4. -
IIR External Participants List – A list containing the name, organization,
phone number, and email address (if none, mail address) of outside stakeholders
who participated in the IIR process. The list should be maintained by the
team and provided to PFTS (IIR@irs.gov) at the end of the process.
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The IIR team must determine if outside experts are needed as soon as
possible. IRM 4.48.1.6 contains procedures for requesting outside experts.
Requests should be submitted as follows:-
Requests for LMSB outside expert funds are submitted through the local
engineer managers. -
Requests for SB/SE outside expert funds are submitted through the local
estate and gift tax managers.
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Upon approval, an assigned team member(s) will work with LMSB Industry
or SB/SE contracting officer representative to draft statement of work and
to obtain experts.
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The IIR team is required to maintain binders/files which will include
the following records:-
Reports (See section 7.40.3.2.1.6.3)
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Contact logs/emails/ letters
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Meeting agendas and minutes
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Outside expert contracting documents
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Information requested and received
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Draft positions
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IIR recommended guidance package and sign-off
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Final published and/or administrative guidance
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Communication documents
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At the end of the IIR process, the binders/files will be sent to issue
owner for record retention.
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FACA was enacted to control the growth and standardize the operations
of committees, and similar groups established to advise executive branch agencies.
The establishment of federal advisory committees is subject to ceilings established
by GSA, and FACA requires advisory committees to comply with certain procedural
requirements, e.g., filing of a charter with GSA and Congress showing balanced
committee membership, and publishing timely notice of meetings in the Federal
Register. For more information about FACA, see Exhibit 7.40.1-5. -
It is not intended that federal advisory committees be formed for the
IIR process. Therefore, in meeting and interacting with the industry and other
interested external stakeholders, IIR teams need to be aware of the provisions
of FACA and operate in such a way to not trigger FACA requirements. -
In meeting with the industry, IIR teams may do the following without
triggering the procedural requirements of FACA:-
have a single meeting;
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have a meeting for outside groups to voice their concerns, propose solutions,
and raise issues that IRS may need to address; -
have a meeting to provide facts and information to outside groups on a
particular IRS policy or initiative; -
have a meeting for the industry to provide information to IRS about industry
practices; or -
seek or accept industry comments on a particular IRS policy or initiative
.
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In meeting and interacting with the industry, IIR teams should not do
the following as such actions may trigger the procedural requirements of FACA:-
enter into negotiations with the industry;
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direct outside groups to draft revenue rulings, revenue procedures or
other published guidance; or -
direct the membership, agenda, or structure of outside groups.
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The second part of the session will start the resolution process and
include the following topics:-
IIR Issue Review
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Industry Orientation Planning
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Development of IIR Issue Work Plan
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The IIR team should review the outside stakeholder’s submission,
information gathered during screening, and any clarifying information the
Team Executive or other members have received. An open discussion should be
held to insure everyone is clear on the issue to be resolved.
