IRS Appeals: Latest Developments
The Expert: Mary McNulty

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Mary McNulty

As the Internal Revenue Service increases enforcement in the wake of the pandemic and receives additional funding, undoubtedly there will be new developments that will impact taxpayers’ experiences when their cases land at IRS Appeals. This article provides tips on navigating these developments at IRS Appeals.

What’s New at IRS Appeals?

Since the pandemic, 1) courts and proposed regulations have limited taxpayers’ right to IRS Appeals; 2) IRS Appeals has revised its initial contact letter to allow taxpayers to choose how they meet with Appeals, whether by telephone, by video, or in person; 3) virtual conferences have become common; 4) IRS specialists and Chief Counsel attorneys are increasingly participating in Appeals conferences; and 5) the Appeals process for Bipartisan Budget Act (BBA) partnership audits is becoming clearer.

Right to IRS Appeals

The 2019 Taxpayer First Act made Appeals “generally available” to all taxpayers.1 Courts have held that this right is not absolute.2 Proposed regulations issued on September 9, 2022, list twenty-four exceptions to the right to IRS Appeals.3 The preamble explains that many of these exceptions are unchanged since before 2019.

The most controversial new exception is that Appeals will not consider procedural challenges to regulations, notices, and revenue procedures unless an unreviewable decision from a federal court holds such guidance invalid.4 Consequently, Appeals will not apply litigating hazards to procedural challenges. Appeals will still consider the substance of a regulation and apply it to the taxpayer’s facts and circumstances.5

Other exceptions to the right to IRS Appeals most relevant to taxpayers under the Large Business and International (LB&I) Division are:

  • cases in which inadequate time remains on the limitations period or before the Tax Court calendar call;6
  • cases under US competent authority jurisdiction;7
  • cases referred to the Department of Justice;8 and
  • issues settled by closing agreement.9

Appeals continues to be unavailable for a case or issue designated for litigation or withheld from Appeals because referral is not in the interest of sound tax administration.10 The proposed regulations provide two examples of when referral of a docketed case is not in the interest of sound tax administration: 1) when a docketed Tax Court case involves a significant issue common to other cases in litigation for which it is important that the IRS maintain a consistent position, and 2) when the Tax Court case is related to a case under the jurisdiction of the Department of Justice.11 According to the preamble, these processes “allow Chief Counsel to strategically manage its cases, fulfilling Chief Counsel’s role of ensuring a consistent application and interpretation of the internal revenue laws and aiding in the development of the tax law.” These processes, however, undermine the perceived independence of Appeals.

The Taxpayer First Act provides appeal procedures for taxpayers who receive a notice of deficiency, request Appeals, but then are denied access.12 The IRS must give a written explanation of its decision that includes a detailed description of the facts, an explanation of how the denial applies to the facts, and the procedures for protesting the denial.

The proposed regulations provide additional detail.13 The appeal of the denial of access to Appeals may not result in getting one to Appeals, but it does allow taxpayers to learn more about Exam’s case. A taxpayer has only one opportunity before Appeals.14 The proposed regulations provide exceptions for Fast Track and other early consideration programs and for post-Appeals mediation. The IRS wants taxpayers to continue to take advantage of these programs.

Initial Contact Letter

At the beginning of the Appeals process, the Appeals officer assigned the case sends an introductory letter and invites the taxpayer or their representative to a conference. The IRS recently revised this letter to make it more understandable and made two key revisions.15

First, the revised initial contact letter advises taxpayers that they can choose how to meet with Appeals, whether by telephone, by video, or in person. The type of conference should not affect Appeals’ decision on the merits of the case.

Second, the initial contact letter now provides contact information for both the Appeals officer and their manager. The Appeals officer remains the primary contact. Routinely providing the manager’s contact information up front helps taxpayers who encounter problems during the Appeals process and want to escalate things to a manager. Previously taxpayers’ representatives were reluctant to ask for the manager’s contact information because of concerns about damaging their relationship with the Appeals officer.

Virtual Conferences

The pandemic stopped in-person meetings. Consequently, cases were not assigned to Appeals officers based on geography, since virtual meetings could be held anywhere. That practice continues. But in-person meetings have resumed, and Appeals must grant an in-person conference upon request.16 Appeals officers continue to prefer virtual conferences, however, although Appeals’ management publicly states that they are committed to in-person conferences.

For Zoom conferences, the parties should have an expectations call in advance to set ground rules for the conference and to test the technology. Ground rules include introducing all participants, turning on cameras, and allowing screen sharing. Interim guidance encourages Appeals officers to abide by best practices, including ensuring a reliable internet connection, dressing professionally, and conducting the conference from a work-appropriate setting with good lighting.17

Zoom conferences work best when there are few participants, so long as everyone turns on their camera. In bigger cases involving teams of participants, in-person conferences are still best, to allow taxpayers and their representatives to read the room. Telephone conferences are the least desirable for taxpayers and their representatives.

IRS Specialist and Chief Counsel Attorneys

IRS specialists and Chief Counsel attorneys have participated in Appeals conferences for years. The Taxpayer First Act codified Appeals’ right to obtain legal assistance from Chief Counsel attorneys. It also requires Chief Counsel to ensure that such assistance is provided by attorneys who have not been involved in the case at the Exam level and are not involved in preparing the case for litigation.18 The participation of IRS specialists has grown in recent years.

The Appeals officer decides whether to include a specialist or counsel. The taxpayer is notified before the conference of that person’s participation. Appeals decides whether the specialist or counsel attends in person based on resources and schedules. When the specialist or counsel is not in the room or participating in the conference but has decision-making authority, taxpayers often question the fairness and impartiality of Appeals, contrary to the Appeals mission statement codified by the Taxpayer First Act.19

The Appeals officer remains the ultimate decision maker when a specialist is involved. However, the Appeals officer must obtain managerial approval to adopt a position contrary to the recommended resolution for coordinated and emerging issues.20 This practice effectively concedes the decision-making authority to the specialist, who may not have even participated in the Appeals conference, again undermining Appeals’ perceived independence.

BBA Partnership Audits

Partnership audits under the Bipartisan Budget Act of 2015 (BBA) are unique, because the partnership has two bites at Appeals.

First, the partnership can go to Appeals to contest the merits of the substantive issues raised by Exam, as well as the imputed underpayment amount and penalties. This takes place after the IRS has issued the Notice of Preliminary Partnership Examination Changes (the thirty-day letter, or Letter 5891) and before it has issued the Notice of Proposed Partnership Adjustment (NOPPA). The Internal Revenue Manual requires that 365 days be left on the statute for Appeals to accept the case from Exam.21 However, the IRS website advises that there must be at least eighteen months left on the statute when the partnership representative requests IRS Appeals.22 An Appeals conference will generally be offered in the Appeals office servicing the area where the partnership has its principal place of business. Appeals will consider the issues and discuss the facts, law, and arguments of the case with the partnership representative.

Second, the partnership can go to Appeals to contest Exam’s decision on the partnership’s modification requests of the imputed underpayment amount.23 This takes place after the IRS has issued the NOPPA, when the 270-day window starts for the partnership representative to submit a modification request.24 If the partnership representative requests a modification request and disputes Exam’s determination, it may then request an Appeals hearing on the unagreed modification items only. Appeals will not reconsider a previous unagreed disputed tax issue when the case is returned to Appeals for a modification hearing. Appeals will hear the same issue only once for BBA cases, regardless of substantive issues or modification issues.25 

Mary McNulty is a partner at Holland and Knight LLP.


  1. Internal Revenue Code Section 7803(e)(4).
  2. See, for example, Hancock County Land Acquisition, LLC v. United States, 130 AFTR 2d 2022-5529 (11th Cir.) and Facebook Inc. v. Internal Revenue Service, 121 AFTR 2d 2018-1752 (N.D. Cal.).
  3. Proposed Treasury Regulations Section 301.7803-2(c).
  4. Proposed Treasury Regulations Section 301.7803-2(c)(19), (20).
  5. Interim guidance issued by Appeals on September 14, 2022, which will be incorporated into Internal Revenue Manual 8.1.1.
  6. Proposed Treasury Regulations Section 301.7803-2(e).
  7. Proposed Treasury Regulations Section 301.7803-2(c)(14).
  8. Proposed Treasury Regulations Section 301.7803-2(c)(14).
  9. Proposed Treasury Regulations Section 301.7803-2(c)(8).
  10. Revenue Procedure 2016-22 (2016-15 Internal Revenue Bulletin 577, Section 3.03).
  11. Proposed Treasury Regulations Section 301.7803-2(c)(21).
  12. Internal Revenue Code Section 7803(e)(5).
  13. Proposed Treasury Regulations Section 301.7803-3.
  14. Proposed Treasury Regulations Section 301.7803-2(f)(1).
  15. Department of the Treasury, Internal Revenue Service, IRS Appeals Revises Initial Contact Letters as Part of Effort to Enhance the Taxpayer Experience (October 4, 2022),
  16. See Internal Revenue Manual Section (Conference Practice).
  17. Department of the Treasury, Internal Revenue Service, Memorandum for Appeals Employees for Required Use of Virtual Conferences (March 22, 2021),
  18. Internal Revenue Code Section 7803(e)(6)(B).
  19. Internal Revenue Code Section 7803(e)(3), which says that Appeals’ function is to “resolve Federal tax controversies without litigation on a basis which is fair and impartial to both the Government and the taxpayer, promotes a consistent application and interpretation of, and voluntary compliance with, the Federal tax laws, and enhances public confidence in the integrity and efficiency of the Internal Revenue Service.”
  20. See Internal Revenue Manual Sections (Participation in Conferences by IRS Employees), (Compliance Coordinated Issues), (Appeals Coordinated Issues), (Appeals Emerging Issues), (Appeals Technical Specialists’ Roles and Responsibilities); and (Review and Concurrence by Technical Guidance or International).
  21. Internal Revenue Manual Section, (8) (October 19, 2021).
  22. Department of the Treasury, Internal Revenue Service, BBA Partnership Audit Process, June 10, 2022,
  23. Internal Revenue Service, BBA Partnership Audit Process.
  24. Internal Revenue Manual Section (October 19, 2021).
  25. Internal Revenue Manual Section (October 19, 2021).

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