Novojustice

Michael A. Jacobs and Robert E. Weyman, Reed Smith:

“Taxpayers under audit and facing an assessment in excess of $1 million may be able to participate in mediation to expedite resolution of their case as part of a new Department pilot program. The timeframe for requesting to participate in the mediation program is limited, so taxpayers should be prepared to make the request prior to their exit conference.

Responding to taxpayer concerns that the appeal process in Massachusetts can take several years, the Department finalized guidance regarding its new administrative early mediation program. The pilot program is intended to resolve disputes within four months after the finalization of an audit through the use of mediation.

In order for a case to head to mediation, both the taxpayer and the Department must agree that mediation is appropriate—otherwise, standard appeal rules apply. While the administrative guidance lays out broad guidelines for the types of cases that the Department will deem appropriate for mediation, how they will be applied in practice remains to be seen. Our view is that the program could be extremely popular with taxpayers if the Department is open to considering a wide variety of cases for mediation.

Takeaways

• Mediation must be agreed to prior to the issuance of the Notice of Intent to Assess by the Department
• The exit interview is probably the best time to make the request
• Mediation must be complete within four months absent unusual circumstances
• Mediation must resolve all issues in the assessment; taxpayers cannot request mediation for only some issues in the assessment and appeal the rest
• The program is available for proposed assessments in excess of $1 million where the issues and facts are fully developed
• The Department’s goal is for the pilot program to include six to ten cases. Our understanding is that slots are still available in the pilot program.
• If mediation is unsuccessful, the Department has put protections in place to prevent taxpayer’s (and the Department’s) submissions to the mediator from becoming discoverable in later litigation”

I think the IRS is an ideal candidate for ODR.  Someone has to make this connection!