The Internal Revenue Service (“IRS”) Independent Office of Appeals has introduced two initiatives aimed at promoting greater transparency and fairness to taxpayers: (1) a Post Appeals Mediation pilot program, and (2) taxpayer access to Appeals Case Memos. While these initiatives are expected to benefit taxpayers navigating IRS Appeals, the IRS and the Department of Treasury (Treasury) recently issued Final Regulations retaining twenty-four exceptions to IRS Appeals access that will initially restrict Appeals consideration.
What is the IRS Appeals Process?
The IRS Independent Office of Appeals (“Appeals”) is the administrative dispute forum that allows a taxpayer to contest an IRS decision. Appeals is a completely independent entity within the IRS that will review cases and make decisions from the facts and law presented. It has the primary responsibility to resolve disputes without litigation to the maximum extent possible through an administrative settlement of the matter. The goal and function of Appeals is to resolve tax controversies, without litigation, in a manner that is fair and impartial to both the government and the taxpayer and will enhance voluntary compliance and public confidence in the integrity and efficiency of the IRS. See 26 U.S. Code § 7803 (e)(3) and Internal Revenue Manual Section 8.1.1.1.1. The right to the Appeals resolution process shall be “generally available to all taxpayers.” See 26 U.S. Code § 7803 (e)(4).
Appeals may be able to review your issue if the following conditions exist:
- The taxpayer must have received a letter from the IRS explaining the right to appeal their decision;
- The taxpayer must disagree with the decision of the IRS; and
- The taxpayer must not have signed the agreement form sent by the IRS.
If the above conditions are met, the taxpayer likely can request a conference or hearing with Appeals. Some things to consider in deciding whether to move forward to Appeals with the dispute include:
- If the taxpayer believes the IRS made the wrong decision because they misunderstood or misapplied the law, it may be a good idea to review IRS publications and other related guidance or to speak with a tax professional.
- If the taxpayer thinks the IRS is taking inappropriate collection action or if a taxpayer’s offer in compromise was denied, and the taxpayer disagrees with the decision, the taxpayer must be prepared to clarify and support the differing position.
- If the taxpayer deems the facts used by the IRS to be incorrect, the taxpayer should prepare organized records or other evidence to present the relevant facts.
Changes Increasing Transparency and Fairness for Taxpayers: the Post Appeals Mediation (“PAM”) Program and Sharing Appeals Case Memos (“ACMs”) with Taxpayers
The new PAM program was announced on October 1, 2025, in IR-2025-100, as a two-year pilot program launched by Appeals, intended to make PAM more attractive and fair to taxpayers. If a taxpayer had an unsuccessful Appeals proceeding, they have the option to request PAM. If the request is granted, both parties will take part in an expedited mediation session as a final attempt to reach a mutually agreeable resolution. The session is led by a neutral Appeals mediator with no prior involvement in the case. Taxpayers can also bring a co-mediator at their own expense. The mediators act as facilitators to promote settlement discussions by clarifying issues and identifying areas of agreement to find common ground.
Under the new PAM pilot program, cases will be reassigned to a new Appeals team to represent the Office of Appeals in mediation. This change does not initiate a new appeal, it is a quicker, renewed review of the case, where mediators assist both parties in exploring all possible avenues for resolution before moving to litigation. This small change in the program could significantly enhance the appeal of PAM to taxpayers and support more effective administration. For more information, see 26 U.S.C. § 7123(b)(1) and Internal Revenue Manual Sections 8.26.5 and 4.51.4.
Another change being made to increase transparency and fairness is that Appeals has now instructed employees to share ACMs with taxpayers upon informal request. This is an important change because ACMs provide a written analysis explaining how the IRS looked at the facts, applicable law, risks of litigation, and the reasoning behind the decision. Sharing these memos with taxpayers allows them to better understand how and why their case was decided in the way it was and promotes transparency. Without transparency, it is difficult to have trust in an institution. By increasing transparency through the release of ACMs, public trust and confidence in Appeals, and the IRS as a whole, will be reinforced.
In announcing that ACMs would be available upon informal request, the National Taxpayer Advocate emphasized that withholding them created an imbalance of information, which compromised both the perception of fairness and the purpose intended by Congress of Appeals’ independence. This consequently eroded taxpayers’ confidence in fair dispute resolution. By sharing the ACMs with taxpayers, dissolution in fair dispute resolution can be restored and may potentially repair the foundation of fairness and transparency in Appeals decisions.
Changes Limiting Access to Appeals Consideration
Although Appeals has facilitated changes to increase the fairness and transparency of the process, access to this process has been limited by the finalization of exceptions to Appeals review in the form of regulations interpreting the Taxpayer First Act of 2019 (“TFA”).
The TFA amended the Internal Revenue Code by adding Section § 7803(e), which formally codified the IRS Independent Office of Appeals, which has operated for over a century. Section 7803(e) imposed several statutory mandates for the IRS Appeals Office:
- Appeals must aim to resolve federal tax disputes administratively, without litigation, in a manner that is fair and impartial, promotes consistent interpretation and application of federal tax law, and enhances public confidence in the IRS’s integrity and efficiency;
- The resolution process must be generally available to all taxpayers; and
- Taxpayers who receive a notice of deficiency and are denied access to Appeals must be provided a written explanation of the denial, which may be subject to internal protest.
Despite these mandates, Treasury and the IRS have interpreted Section § 7803(e)(3), as well as the “reasonable exceptions” language coming from the House TFA Report, to justify excluding certain taxpayers and issues from the Appeals process, even those that were previously eligible under the Tax Reform Act.
The Treasury and IRS issued Final Regulations on January 15, 2025, in 90 Fed. Reg. 3645 (Jan. 15, 2025) (codified at 26 C.F.R. 301.7803-2(c)) governing how the Independent Office of Appeals resolves federal tax disputes. These regulations preserve twenty-four (24) categorical exceptions that limit the scope of issues eligible for Appeals consideration and, in some cases, deny taxpayers access to Appeals altogether. For example, the following situations may be excluded from IRS Appeals review:
- Certain excise taxes;
- Most issues concerning IRS Closing Agreements;
- Certain returns or rejections of Offers in Compromise under a non-processable determination;
- Any cases where a criminal tax-related offense is pending or recommended;
- Notices and determinations of seriously delinquent tax debts; and
- Anything that lacks the authority to settle.
The twenty-four (24) exceptions limiting access to Appeals review weaken the availability of this independent forum for taxpayers. As a result, taxpayers must closely examine whether any of these exclusions apply to their specific case before seeking review.
What Does This Mean for You?
The IRS Independent Office of Appeals has taken significant steps to move towards a more open and fair process through the launch of the PAM pilot program and the release of ACMs. However, these positive steps are limited by the issuance of Final Regulations by the IRS and Treasury. By preserving the several exceptions that restrict access to Appeals, these regulations may limit the reach of these reforms and their anticipated benefit to taxpayers as many taxpayers could be blocked from having access to Appeals. Taxpayers who anticipate using the Appeals process must be aware of these exceptions.
The team at Gensburg Calandriello & Kanter, P.C. is available to assist you and your business with any aspect related to IRS Appeals, as well as any other tax or business-related legal needs. For more information, and for comprehensive support and guidance, please do not hesitate to contact us.
Sandra Mertens, Esq. and Grace Symington
smertens@gcklegal.com
gsymington@gcklegal.com