SECTION 5. SCOPE OF MEDIATION

AND ARBITRATION FOR TFRP CASES

1. Appropriate issues for mediation in TFRP cases generally include:

(1) Whether a person was required to collect, truthfully account for, and pay over income, employment, or excise taxes;

(2) Whether a responsible person willfully failed to collect or truthfully account for and pay over such tax, or willfully attempted in any manner to evade or defeat the payment of such tax;

(3) Whether a taxpayer sufficiently designated a payment to the trust fund portion of the unpaid tax; and

(4) Whether the taxpayer provided sufficient corporate payroll records to establish that a corporate tax deposit was in the amount required by Treas. Reg. § 31.6302–1(c) and therefore was considered a designated payment to be applied to both the trust fund and non-trust fund portions of the employment taxes associated with that specific payroll. See the Note to IRM 5.7.4.3(7).

2. Appropriate issues for arbitration in TFRP cases generally include:

(1) Specific factual determinations concerning whether a person was required to collect, account for, and pay over income, employment, or excise taxes. Common factors include whether the taxpayer:

a. was an officer, director, or shareholder of the corporation; b. had the authority to sign checks; c. exercised significant control over the corporation’s financial affairs; d. had the authority to determine which creditors would be paid; e. was involved in payroll disbursements; f. had control over the voting stock of the corporation;

3. The overall determination whether a taxpayer was required to collect, truthfully account for, and pay over income, employment or excise taxes, and/or whether a taxpayer willfully failed to collect or truthfully account for and pay over such tax or willfully attempted in any manner to evade or defeat the payment of such tax are legal issues for which arbitration is not available. These legal issues, however, are based on factual components that are eligible for arbitration.

4. The overall determination whether a taxpayer’s offer is acceptable under section 7122 may only be made by the Secretary or his delegate and is not a matter for arbitration. See section 7122(a) (giving the Secretary the discretionary authority to compromise tax liabilities) and Delegation Order 5–1 (delegating that discretionary authority to Appeals). Factual determinations are generally required as part of making the overall offer acceptability determination, however, and these individual factual determinations are eligible for arbitration.

5. The Appeals Area Director must approve the acceptance of all cases for mediation or arbitration.