SECTION 7. EFFECT — Internal Revenue Bulletin 2002-26

DOCUMENTS

Announcement 98–99 and Announcement 2001–9 are superseded.

DRAFTING INFORMATION

The principal author of this revenue procedure is Sandy Cohen, of the office of Appeals Large Business and Specialty Programs - Operations, Headquarters Appeals. For further information regarding this revenue procedure, contact Mr. Cohen at (202) 694–1818 (not a toll-free call).

of any revenue law to the Secretary. The agreement to mediate will state this requirement and the parties will acknowledge this duty.

.13 Disqualification of the non- Internal Revenue Service co-mediator . The non-Internal Revenue Service co-mediator will be disqualified from representing the taxpayer in any pending or future action that involves the transactions or issues that are the particular subject matter of the mediation. This disqualification extends to representing any other parties involved in the transactions or issues that are the particular subject matter of the mediation. Moreover, the mediator’s firm will be disqualified from representing the taxpayer or any other parties involved in the transactions or issues that are the particular subject matter of the mediation in any action that involves the transactions or issues that are the particular subject matter of the mediation.

The mediator’s firm will not be disqualified from representing the taxpayer or any other parties in any future action that involves the same transactions or issues that are the particular subject matter of the mediation, provided that (i) the mediator disclosed the potential of such representation to the parties to the mediation conducted by the mediator prior to the parties’ acceptance of the mediator, (ii) such action relates to a taxable year that is different from the taxable year that is the subject matter of the mediation, (iii) the firm’s internal controls preclude the mediator from any form of participation in the matter, and (iv) the firm does not apportion to the mediator any part of the fee therefrom. In the event the mediator has been selected prior to the mediator learning of the identity of one or more of the parties involved in the mediation, requirement (i) will be deemed satisfied if

the mediator promptly notifies the parties of the potential representation.

While the mediator may not receive a direct allocation of the fee from the taxpayer (or other party) in the matter for which the internal controls are in effect, the mediator will not be prohibited from receiving a salary, partnership share, or corporate distribution established by prior independent agreement. The mediator and his or her firm are not disqualified from representing the taxpayer or any other parties involved in the mediation in any matters unrelated to the transactions or issues that are the particular subject matter of the mediation.

This paragraph 12 only applies to representations on matters before the IRS.

The provisions of this paragraph 12 are in addition to any other applicable disqualification provisions including, for example, the rules of the United States Tax Court and applicable canons of ethics.

.14 Withdrawal . Either party may withdraw from the process anytime before reaching a settlement of the issues being mediated by notifying the other party and the mediator in writing.

.15 Mediator’s report . At the conclusion of the mediation process, the mediator will prepare a brief written report and submit a copy to each party. See Exhibit 4 of this revenue procedure for a model mediator’s report.

.16 Appeals procedures apply . If the parties reach an agreement on all or some issues through the mediation process, Appeals will use established procedures, including preparation of a Form 906, Closing Agreement on Final Determina- tion Covering Specific Matters . See Statement of Procedural Rules, 26 C.F.R. § 601.106. Delegation Order 236 (Rev. 3) may apply to settlements resulting from the mediation process.

2002–26 I.R.B. 13 July 1, 2002

Exhibit 1:

Addresses for Appeals Area Directors

Appeals Large Business and Specialty Programs (LBSP) Operating Unit Director, Appeals LBSP Area 1 Director, Appeals LBSP Area 4 290 Broadway 1650 Mission Street New York, NY 10007 San Francisco, CA 94103

Director, Appeals LBSP Area 2 Director, Appeals LBSP Specialty 8701 South Gessner Road Programs Houston, TX 77074 1222 Spruce Street

St. Louis, MO 63103 Director, Appeals LBSP Area 3 200 W. Adams Street Chicago, IL 60606

General Appeals Operating Unit

Director, General Appeals Area 1 290 Broadway New York, NY 10007

Director, General Appeals Area 2 31 Hopkins Plaza Baltimore, MD 21201

Director, General Appeals Area 3 575 North Pennsylvania Street Indianapolis, IN 46204

Director, General Appeals Area 4 810 Broadway Nashville, TN 37203

Director, General Appeals Area 5 4050 Alpha Road Dallas, TX 75244

Director, General Appeals Area 6 160 Spear Street San Francisco, CA 94105

Director, General Appeals Area 7 24000 Avila Road Laguna Nigel, CA 92677

July 1, 2002 14 2002–26 I.R.B.

Exhibit 2:

The Mediation Process.

Model Agreement to Mediate

The mediation will be an extension of the Appeals process to help [ NAME OF TAXPAYER ] and Internal Revenue Service (IRS)—Appeals (the PARTIES) reach their own negotiated settlement of the issues to be mediated. See (2) below for the participants in the mediation process. To accomplish this goal, the mediator will act as a facilitator, assist in defining the issues and promote settlement negotiations between the PARTIES. The mediator will inform and discuss with the PARTIES the rules and procedures pertaining to the mediation process. The mediator will not have settlement authority and will not render a decision regarding any issue in dispute. The PARTIES will continue to have settlement authority for all issues considered under the mediation process.

Nature of Process, Participants, Withdrawal.

(a) The mediation process is optional.

(b) Each PARTY must have at least one participant attending the mediation session with decision-making authority. No later

than two weeks before the mediation, each PARTY will submit to the other PARTY and the mediator a list of the participants who will attend the mediation session on behalf of or at the request of the PARTY, including a designation of the person with decision-making authority who will represent the PARTY at the mediation session. Each PARTY’s list of participants will contain the participant’s name, the participant’s position with the PARTY or other affiliation ( e.g., a member of the XYZ law firm, counsel to the taxpayer), and the participant’s address, [telephone number and fax number]. All participants attending the mediation on behalf of or at the request of a PARTY will be listed on the PARTY’s list of participants, including witnesses, consultants, and attorneys.

[Insert limitations on the number or types of participants, if any.]

(c) Either PARTY may withdraw from the process at any time prior to reaching a settlement of the issues to be mediated by

notifying the other PARTY and the mediator in writing.

Selection of Mediator and Costs.

(a) [ NAME OF TAXPAYER ] and [ NAME ], Appeals Team Manager will select an Appeals mediator. If the taxpayer elects

to use a non-IRS 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-IRS co-mediator may include: completion of mediation training, previous mediation experience, a substantive knowledge of tax law, or knowledge of industry practices. A potential mediator must disclose any official, financial, or personal conflict of interest with respect to the PARTIES. Any potential mediator with any such conflict of interest may not serve as a mediator, unless such interest is fully disclosed in writing to the PARTIES and they agree that the mediator may serve. See 5 U.S.C. § 573.

(b) Headquarters Appeals will pay the costs associated with the Appeals mediator. The taxpayer may elect to use a non Internal Revenue Service co-mediator, at the taxpayer’s expense.

(c) 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, and that a conflict results from his/her continued status as an IRS employee.

Issues to be Mediated.

The mediation session will encompass the following issues in the IRS audit of [ NAME OF TAXPAYER ]’s federal tax returns for tax year(s) : (a) Issue #1 (b) Issue #2

Submission of Materials.

Each PARTY will present to the mediator a separate written summation not to exceed 20 pages (exclusive of exhibits consisting of pre-existing documents and reports) regarding each issue. The mediator will have the right to ask either PARTY for additional information before the mediation session if deemed necessary for a full understanding of the issues to be mediated. Each PARTY will simultaneously submit a copy of any submission that it gives to the mediator to the other party.

2002–26 I.R.B. 15 July 1, 2002

Place of Mediation.

The PARTIES should attempt to select a site at or near the mediator’s office, [ NAME OF TAXPAYER ]’s office, or an Appeals office.

Proposed Schedule.

Subject to the approval of the mediator, the mediation session will be conducted according to the following schedule:

Submission of Materials to Mediator: A DATE, WHICH IS NOT LATER THAN TWO WEEKS BEFORE THE DATE OF MEDIATION SESSION

Mediation Session: By MONTH DAY, YEAR and TIME

Confidentiality.

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) of the Internal Revenue Code, including the mediator, 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. See also 5 U.S.C § 574.

[ NAME OF 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 list of participants. If the mediation agreement is executed by a person pursuant to a power of attorney executed by [ NAME OF TAXPAYER ], that power of attorney must clearly express the grant of authority by [ NAME OF TAXPAYER ] to consent to disclose the returns and return information of [ NAME OF TAXPAYER ] by the IRS to third parties. A copy of that power of attorney must be attached to this agreement.

Ex Parte Contacts Prohibited.

There will be no ex parte contacts from a party to the mediator outside the mediation session. This provision is not intended to prevent the mediator from contacting a party, or a party from responding to the mediator’s request for information.

Section 7214(a)(8) Disclosure.

The PARTIES to this agreement acknowledge that IRS employees involved in this mediation are bound by the § 7214(a)(8) disclosure requirements concerning violations of any revenue law.

No Record.

There will be no stenographic record, no audio or video tape recording or other transcript of the mediation session(s).

Report by Mediator.

At the conclusion of the mediation session, the mediator will issue a brief report to the PARTIES identifying each issue described in section 4, above, and whether the PARTIES either agreed to resolve or did not resolve the issue.

Appeals Procedures Apply.

If the mediation process enables the PARTIES to reach agreement on the issues, Appeals will use established procedures to close the case. Delegation Order 236 (Rev. 3) may apply to settlements resulting from the mediation process. If the parties do not reach an agreement on an issue being mediated, the parties 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.

July 1, 2002 16 2002–26 I.R.B.

Precedential Use.

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.

INTERNAL REVENUE SERVICE, APPEALS NAME OF TAXPAYER

By: By: NAME NAME Appeals Team Manager TITLE

Date: Date:

Exhibit 3:

Model Mediation Participants List

Case Name:

Submitted By:

Date:

Please list below all participants attending the mediation, including witnesses, consultants, and attorneys. This form must be sent to the other PARTY and to the mediator(s) no later than two weeks before the mediation session. Insert an asterisk (*) before the name of the person who has decision-making authority at the mediation session:

NAME POSITION OR AFFILIATION

ADDRESS TELEPHONE & FAX NUMBER

2002–26 I.R.B. 17 July 1, 2002

Exhibit 4:

Model Mediator’s Report

The parties below agreed to mediate their dispute and attended a mediation session on MONTH DAY, YEAR in an attempt to settle the following issue(s):

ISSUE: SETTLEMENT: [ ] Yes

[ ] No

[ ] Partial

ISSUE: SETTLEMENT: [ ] Yes

[ ] No

[ ] Partial

Settlement documents will be prepared under established Appeals procedures.

DATED this day of

/s/ Mediator

/s/ Party

July 1, 2002 18 2002–26 I.R.B.