SECTION 5. MEDIATION — Internal Revenue Bulletin 2002-26

.01 Mediation is optional . A taxpayer and an Appeals Team Case Leader or Appeals Officer may request mediation after consultation with each other.

.02 Filing requirements.

(1) Where to file . The taxpayer seeks approval for mediation by sending a written request to the appropriate Appeals Team Manager. The taxpayer should also send a copy of the written request to the appropriate Appeals Area Director and to the Chief Appeals, 1099 14 ^th Street, NW, Suite 4200 - East, Washington, DC

20005, Attn: Appeals LBSP Operations. (See Exhibit 1 of this revenue procedure for a listing of the addresses for each Appeals Area Director.)

(2) Required information . The mediation request should:

(a) Provide the taxpayer’s name, TIN, address and the name, title, address and telephone number of a person to contact;

(b) Provide the Team Case Leader’s or Appeals Officer’s name;

(d) Describe the issue for which mediation is being requested, including the dollar amount of the adjustment in dispute; and

(e) Contain a representation that the issue is not an excluded issue listed in the “Scope of Mediation” section above.

.03 Review of Mediation Request . Generally, the Appeals Team Manager will respond to the taxpayer and the Team Case Leader or Appeals Officer within two weeks after the Appeals Team Manager receives the taxpayer’s request for mediation.

(1) Request approved . If Appeals approves the mediation request, the Appeals Team Manager will inform the taxpayer and the Team Case Leader or Appeals Officer, and schedule a conference or conference call that may include a representative from Appeals LBSP Operations, Headquarters Appeals - to discuss the mediation process.

(2) Request denied . If Appeals denies the mediation request, the Appeals Team Manager will promptly inform the taxpayer and the Team Case Leader or Appeals Officer. Although no formal appeal procedure exists for the denial of a mediation request, a taxpayer may request a conference with the Appeals Team Manager to discuss the denial. The denial of a mediation request is not subject to judicial review.

.04 Agreement to mediate . The taxpayer and Appeals will enter into a written agreement to mediate. See Exhibit 2 of this revenue procedure for a model agreement to mediate. This agreement will be negotiated at an administrative conference or conference call — that may include a representative from Appeals

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LBSP Operations, Headquarters Appeals. The agreement to mediate: (a) should be as concise as possible, (b) will specify the issue(s) that the parties have agreed to mediate, and (c) should identify the location and the proposed date of the mediation session.

The Appeals Team Manager, in consultation with the Team Case Leader or Appeals Officer, will sign the agreement to mediate on behalf of Appeals.

Generally, it is expected that the parties will complete the agreement to mediate within three weeks after being notified that Appeals approved the mediation request and proceed to mediation within 60 days after signing the agreement to mediate. A taxpayer’s inability to adhere to these timeframes, without reasonable cause, may result in Appeals’ withdrawal from the mediation process.

.05 Participants . The parties to the mediation process will be the taxpayer and Appeals. Absent an agreement to the contrary, each party must have at least one participant attending the mediation session with decision-making authority. The mediation agreement will set forth the procedures by which the parties inform the other party and the mediator of the participants in the mediation and will set forth any limitation on the number, identity or participation by such participants. In general, the parties are encouraged to include, in addition to the required decision-makers, those persons with information and expertise that will be useful to the decision-makers and the mediator. In order to minimize the possibility of a last-minute disqualification of the mediator, each party must notify the mediator and the other party no later than two weeks before the mediation, regarding the participants on their mediation team. See Exhibit 3 of this revenue procedure for a model participants list.

.06 Selection of mediator and expenses . The taxpayer and the Appeals Team Manager will select the mediator. A representative from Appeals LBSP Operations, Headquarters Appeals may participate in an administrative conference or conference call to discuss the selection of the mediator by the parties. A mediator shall have no official, financial, or personal conflict of interest with respect to the parties, unless such interest is fully disclosed in writing to the taxpayer and

the Appeals Team Manager, and they agree that the mediator may serve. See 5 U.S.C. § 573.

This mediation procedure requires the use of an Appeals employee who is a trained mediator. Headquarters Appeals will pay the expenses associated with the Appeals mediator. The taxpayer may also elect to use a non-Internal Revenue Service co-mediator, at the taxpayer’s expense.

.07 Appeals personnel as mediators and conflict statement . The taxpayer and the Appeals Team Manager will select an Appeals mediator from a list of eligible individuals who, generally, will be from the same Appeals office or geographic area, but not the same group, where the case is assigned.

Due to the inherent conflict that results because the Appeals mediator is an employee of the IRS, the Appeals mediator will provide to the taxpayer a statement confirming his/her proposed service as a mediator, that he/she is a current employee of the IRS, that a conflict results from his/her continued status as an IRS employee, and that this conflict will not interfere in the mediator’s ability to impartially facilitate the case. The written agreement to mediate will include this statement.

.08 Criteria for selection of non- Internal Revenue Service co-mediator . If the taxpayer elects to use a non-Internal Revenue Service co-mediator, the taxpayer and the Appeals Team Manager should make the selection from any local or national organization that provides a roster of neutrals. Criteria for selecting a non-Internal Revenue Service co-mediator may include: completion of mediation training, previous mediation experience, a substantive knowledge of tax law, or knowledge of industry practices.

.09 Discussion summaries . Each party will prepare a discussion summary of the issues (including the party’s arguments in favor of the party’s position) for consideration by the mediator. The discussion summaries should be submitted to the mediator and the other party no later than two weeks before the mediation session is scheduled to begin.

.10 Confidentiality . The mediation process is confidential. Therefore, all information concerning any dispute resolution communication is confidential and may

not be disclosed by any party, participant, observer or mediator except as provided by statute, such as in § 6103 of the Internal Revenue Code and 5 U.S.C § 574. A dispute resolution communication includes all oral or written communications prepared for the purposes of a dispute resolution proceeding. See 5 U.S.C. § 571(5).

In executing the mediation agreement, the taxpayer consents under § 6103(c) to the disclosure by the IRS of the taxpayer’s returns and return information incident to the mediation to any participant or observer identified in the initial lists of participants and observers and to any subsequent participants and observers identified in writing by the parties. ( See section 5.05 of this revenue procedure.) If the mediation agreement is executed by a person pursuant to a power of attorney executed by the taxpayer, that power of attorney must clearly express the taxpayer’s grant of authority to consent to disclose the taxpayer’s returns and return information by the IRS to third parties, and a copy of that power of attorney must be attached to the agreement.

IRS and Treasury employees who participate in or observe the mediation process in any way, and any person under contract to the IRS pursuant to § 6103(n) that the IRS invites to participate or observe, will be subject to the confidentiality and disclosure provisions of the Internal Revenue Code, including §§ 6103, 7213, and 7431.

.11 Ex Parte Contacts Prohibited . To ensure that one party is not in a position to exert undue influence on the mediator, there will be no ex parte contacts with the mediator outside the mediation session.

The prohibition against ex parte communications is intended to apply only to unsolicited contacts from one of the parties outside the mediation session. It ensures the mediator does not receive information or evidence the other party is unaware of and is unable to respond to or rebut.

This provision does not prevent the mediator from contacting a party, or a party from answering a question or request posed by the mediator.

.12 Section 7214(a)(8) disclosure . Under § 7214(a)(8), IRS employees must report information concerning violations

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If the parties do not reach an agreement on an issue being mediated, they may request arbitration for the issue, provided the mediation issue meets the requirements for arbitration. See Announcement 2002–60, 2002–26 I.R.B. 28, or any subsequent procedure. If arbitration is not requested or approved, Appeals will not reconsider the mediated issue(s), and a statutory notice of deficiency will be issued with respect to all unagreed issues; or for non-deficiency cases, they will be processed using established closing procedures.

.17 Use as precedent . A settlement reached by the parties through mediation will not be binding on the parties (or be otherwise controlling) for taxable years not covered by the agreement. Except as provided in the agreement, any party may not use such settlement as precedent.