SECTION 2. DESCRIPTION

Alternative dispute resolution (ADR) programs are consistent with the IRS’s efforts to improve tax administration and enhance customer service. Appeals will seek appropriate OIC and TFRP cases for both mediation and arbitration during the test period in order to evaluate the effectiveness of alternative dispute resolution for such cases.

During the extended test period, Appeals will continue to offer mediation and arbitration for OIC and TFRP cases for taxpayers whose appeals are considered at an Appeals office located in one of the following cities:

Service Restructuring and Reform Act of 1998 does not apply to the communications arising in the SB/SE FTS process because the Appeals personnel are facilitating an agreement between the taxpayer and SB/SE and are not acting in their traditional Appeals settlement role.

Any recommended settlement by the FTS Appeals Official of an issue in FTS shall be subject to the procedures that would be applicable if the issue were being considered by Appeals, including procedures in the Internal Revenue Manual and existing published guidance. FTS therefore creates no special authority for settlement by the FTS Appeals Official. For example, if the FTS issue is coordinated in either the Technical Advisor Program or the Appeals Technical Guidance program, the proposed settlement of that issue is subject to established procedures, including submission of the proposed settlement to the Appeals Coordinator for review and concurrence.

If the parties fail to resolve any issue in FTS, the taxpayer retains the option of requesting that the issue be heard through the traditional Appeals process.

Except as specifically provided above, both parties retain the right to withdraw throughout the entire SB/SE FTS process. A party wishing to withdraw should provide written notice to the FTS Appeals Official and the other party.

POST-SETTLEMENT PROCEDURE

If the parties reach an agreement on all or some issues through the SB/SE FTS process, the SB/SE representative or FTS Appeals Official, as appropriate, will use established issue or case closing procedures and applicable agreement forms, including preparation of a Form 906 specific matters closing agreement, if appropriate.

If applicable, the Service will report a proposed resolution reached as a result of SB/SE FTS to the Joint Committee on Taxation in accordance with section 6405. The taxpayer acknowledges that the Service may reconsider a proposed settlement, as reflected in a signed FTS Session Report, upon receipt of comments on the proposed settlement from the Joint Committee on Taxation. If the taxpayer declines to agree with any changes by the Service upon reconsideration, SB/SE will close the case unagreed and the taxpayer will retain

all the usual rights to request Appeals consideration of any unagreed issues.

GENERAL PROVISIONS

A resolution reached by the parties through the SB/SE FTS process will not bind the parties for taxable years or issues not covered by the SB/SE-Appeals FTS agreement, unless such taxable years or issues are expressly addressed in a formal closing agreement reached as part of the SB/SE FTS process.

For SB/SE FTS cases that are returned for traditional Appeals consideration for any reason, ex parte restrictions will not be imposed on intra-Appeals communications. Appeals management will take appropriate measures to ensure these cases are handled impartially.

DELEGATION OF AUTHORITY

This announcement constitutes a delegation by the Commissioner of Internal Revenue of settlement authority to Grade 14, 13, and 12 Appeals Officers who are assigned to be Appeals FTS Officials for SB/SE FTS cases described in this announcement. This delegation of settlement authority includes the responsibility for arriving at the final disposition from the Government’s perspective, approving the final settlement in accordance with the delegated authority, and executing the appropriate closing documents. This authority may not be redelegated.

EFFECTIVE DATE

SB/SE FTS is effective beginning December 1, 2010, in the pilot locations.

FURTHER INFORMATION

For further information regarding this announcement, contact Nancy J. Talajkowski, Appeals, Tax Policy & Valuation at (415) 227–5007 (not a toll-free number) or by e-mail at Nancy.J.Talajkowski@irs.gov .

January 24, 2011 433 2011–4 I.R.B.

Appeals may expand the availability of this program to other locations during the two-year extension. Upon completion of the test period, Appeals will evaluate this program, consider necessary adjustments to both the mediation and arbitration components of the program, and determine whether to make the arbitration component permanent.