How are issues resolved in the CAP

Issues in the Compliance Assurance Process (CAP) are resolved through a structured and collaborative approach between the taxpayer and the IRS. Here is a detailed explanation of the process:

1. Initial Disclosure and Review:
   • The taxpayer must fully disclose the issue to the IRS. Once disclosed, the IRS typically has 90 days to review and determine agreement or disagreement with the tax treatment. If additional time is needed, the Territory Manager, in collaboration with the Issue Territory Manager, may approve extensions.
2. Issue Resolution Agreements (IRA):
   • Issues that arise during the CAP process are resolved using Issue Resolution Agreements (IRA). This involves a collaborative relationship between the taxpayer and the IRS Account Coordinator (AC), who works to identify and resolve issues during the tax year rather than after the return is filed.
3. Fast Track Settlement (FTS):
   • If disputes arise that cannot be resolved through the regular CAP process, Fast Track Settlement (FTS) is available as an Alternative Dispute Resolution (ADR) tool. FTS is designed to help resolve disputes expeditiously while the case is still under the jurisdiction of the Large Business and International (LB&I) division.
   • The FTS process involves a specially trained Appeals Official who facilitates settlement discussions between the taxpayer and LB&I. The Appeals Official acts as a neutral party to help both sides understand the nature of the dispute and reach a mutually satisfactory resolution consistent with applicable law.
   • The prohibition against ex parte communications does not apply during FTS because the Appeals employees are not acting in their traditional settlement role.
4. Application for Fast Track Settlement:
   • The process begins with the submission of an Application for Fast Track Settlement by the Team Manager to the LB&I and Appeals Fast Track Settlement Program Managers. The application includes issue positions from both parties for consideration before the opening conference.
5. Settlement and Documentation:
   • If an agreement is reached during FTS, it is documented using Form 906, Closing Agreement on Final Determination Covering Specific Matters. The FTS Appeals Official prepares a Fast Track Settlement Session Report, which is signed by all parties.
   • If the issue is resolved using LB&I resolution authority, the original IRA is attached to the final signed Fast Track Settlement Session Report. The agreed resolution is incorporated into the applicable Form 906, prepared by the AC and executed by the appropriate LB&I official upon completion of CAP.
6. Post-Filing Examination:
   • If issues are not resolved during the pre-filing phase, they can continue to be addressed in a post-filing examination. All issue resolution tools remain available throughout both pre-filing and post-filing activities.
7. Joint Committee Review:
   • For cases requiring Joint Committee review, Appeals delays execution of the closing agreement until LB&I completes the Joint Committee procedures. LB&I is responsible for preparing the Joint Committee report, and the Appeals Official involved in the settlement is available to respond to inquiries from the Joint Committee.
8. Finalization:
   • Upon completion of the Fast Track Settlement, Appeals follows established closing procedures, sends a closing letter, and provides copies of the Fast Track Settlement closing documents to the taxpayer, AC, and LB&I Team Manager.

This structured approach ensures that issues are resolved efficiently and collaboratively, minimizing the need for post-filing reviews and fostering a cooperative relationship between the taxpayer and the IRS.

Sources:
IRM Part 4. Examining Process. Chapter 46. LB&I Examination Process. Section 4. Executing the Examination
IRM Part 8. Appeals. Chapter 26. Alternative Dispute Resolution (ADR) Program. Section 1. Fast Track Settlement for Large Business and International (LB&I) Taxpayers
IRM Part 13. Taxpayer Advocate Service. Chapter 1. Taxpayer Advocate Case Procedures. Section 24. Advocating for Case Resolution
IRM Part 5. Collecting Process. Chapter 1. Field Collecting Procedures. Section 9. Collection Appeal Rights
IRM Part 8. Appeals. Chapter 24. Collection Appeals Program and Jeopardy Levy Appeals. Section 1. Collection Appeals Program (CAP)
IRM Part 8. Appeals. Chapter 26. Alternative Dispute Resolution (ADR) Program. Section 8. Compliance Assurance Process - Fast Track Settlement