Thinking cooperatively: the IRS's vision statement

Tax Executive, The, Jan-Feb, 1993 by Shirley D. Peterson

Good afternoon, ladies and gentlemen. I am pleased to be with you today at [the New York Chapter's] Annual Tax Symposium. This Symposium is a perfect example of TEI's tradition of promoting education and communication in the administration of the tax laws. I am happy to be able to contribute to these worthwhile goals.

Last month your president, Tom Wharton, wrote me a letter suggesting that my remarks to you today focus on cooperation between the IRS and taxpayers. Tom explained very succinctly why cooperation must be our serious commitment, and I will take the liberty of quoting him. Tom said, "We are all citizens, whether individual or corporate, of the same nation. We should be striving wherever possible to reduce the compliance burden and the obstacles [we face in determining] the correct tax."

I agree wholeheartedly. In fact, I find it particularly fitting to discuss cooperative tax administration at this time, with this group. The time is fitting because my term as Commissioner is drawing to a close, and I intend to make the most of every remaining opportunity I have to underscore basic themes of the IRS vision for the future. Cooperation with taxpayers is central to that vision. The forum is fitting because TEI has been a leader in working cooperatively with the IRS, even before cooperation became fashionable. This organization has the potential to be one of the solid building blocks of our evolving tax administration, precisely because you place such value on the communication and education that this Symposium typifies.

Today I would like to focus particularly on one area where cooperation has already proved fruitful in improving tax administration, and that is the Large Case Program. I know that you are all very well acquainted with this program as corporate tax executives and as TEI members. TEI has been involved with our coordinated exam program from its inception, and most recently your members commented very constructively on CEP during our 1990 Quality Improvement Process review.

The Large Case Program stands as a hallmark of cooperation, an excellent example of what we can accomplish when we work together. Today I would like to reflect on some important aspects of the program and to mention some improvements that we are planning. I also want to follow up on my remarks at TEI's annual meeting in San Diego last month by sharing with you some exciting prospects for the future.

The first issue I would like to discuss is the role of the Office of Chief Counsel in the Large Case Program. As most of you know, we have been using a team approach to large case audits for many years. For the past few years, we have actively incorporated assistance from Counsel, both in the field and in the National Office, as an essential element of the large case team. As a general rule, I believe that by involving our lawyers earlier we have improved the process both for taxpayers and the Service. It is to everyone's advantage to identify, develop, and dispose of issues correctly and swiftly.

When we first undertook to achieve greater cooperation between Exam and Counsel, some taxpayers expressed concern that we might be emphasizing litigation as the preferred means of resolving cases. That has never been our objective -- in fact, our goal is just the opposite. We believe we can expedite the resolution of cases without litigation by bringing all the technical expertise at our command to bear at the earliest possible stage of a case.

If you reflect on this approach from a business perspective, I think you will admit that it makes sense. There is no reason that we should fail to use the talent we have, as long as our process is fair. You do the same in your own corporations. But I also believe that we are serving your interests. We are making sure that we give the fullest consideration to a taxpayer's position before forcing the issues to court. With our improved coordination, we are overcoming the obstacles presented by geographic distance, by communication difficulties, and by potentially inconsistent application of the law among the various jurisdictions. I think you are coming to realize that we are sincere in this objective to serve you better, based on the comments I hear from practitioners and from TEI members themselves.

I know one important issue remains for you, and that is whether our new approach might operate, whether intentionally or not, to deprive taxpayers of the traditional right, through formal technical advice or more informally, to present legal arguments to the person most directly responsible for deciding the Service's legal position. Today I want to assure you that our policy is to encourage these direct communications, not to discourage them.

Formal technical advice is just as available today as ever. In fact, the number of formal technical advice requests has been increasing over time, even with the advent of more informal communication between Counsel and Exam.

In addition, we are continuing to encourage our Field personnel to facilitate communication between taxpayers and our technical experts. In particular, when the Exam team is relying on legal advice from Counsel concerning a matter of substantive tax law, the taxpayer in the ordinary course should have an opportunity to discuss the legal issue with the persons providing the advice, and the Exam team should facilitate and participate in those discussions. This kind of communication is a necessary condition if we are to resolve cases cooperatively. Our goal, as yours, is to avoid protracted litigation.