Transcript Managing a Tax ControversyCradle to Grave

Managing a Tax Controversy
Cradle to Grave
Detroit TEI – December 9, 2014
Jean A. Pawlow
[email protected]
(202) 756-8297
Roger J. Jones
[email protected]
(312) 984-2731
Jane May
[email protected]
(312) 984-2115
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Agenda
 Before the Examination Begins . . . . . . . . . . . . . . . . . . .
 The CAP Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
 The Examination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
 IRS Appeals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Before the Examination
Begins
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Introduction
 Controversy considerations shape transactions from day 1 until the statute of
limitations on assessment has expired.
 Controversy permeates all issues, and you must always look beyond the Code
and Regulations.
– IRS administrative position and attitude on specific issues.
– Perception of issue (“tax shelter” or “legitimate tax planning”).
– Objective assessment of hazards of litigation.
– Judicial doctrines and tendencies of various courts and judges.
 The taxpayer has the burden to document and support its tax treatment; if it does
not, it will lose the issue.
– “Guilty until proven innocent” – range of proof generally from establishing position by
preponderance of evidence to showing IRS position is arbitrary and capricious.
– Reluctance of courts to shift burden to IRS or to state, even when taxing authority
departs from the statute.
 The taxpayer’s ability to produce supporting documents, while at the same time
properly eliminating redundant and unnecessary documents that might be taken out of
context by the IRS or a state, is a key to proving the taxpayer’s position.
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Preparation Starts Before the Audit
 Review experiences in past audits.
 Anticipate audit questions that will arise.
 Anticipate increased focus on economic substance and step-transaction doctrines,
particularly with respect to multi-step, complicated transactions.
 With states, anticipate increased scrutiny on intercompany transactions and a focus
on business purpose generally.
 Document transactions and key areas of risk.
 Consider need for experts.
 Identify potential witnesses; consider affidavits.
 Lay the foundation for privilege where appropriate.
 Prepare self-audit adjustments and affirmative adjustments as they are identified.
 Plan ahead for potential strategic use of procedures.
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Recordkeeping and Information
Reporting Requirements
 The Internal Revenue Code and Regulations thereunder prescribe document retention
requirements in only a few specific areas.
– IRC § 6001 requires that taxpayers retain documents that “are sufficient to establish the amount of income,
deductions, credits, or other matters relevant to any tax return.”
– Treas. Reg. § 1.6662-6(d)(2)(iii) requires that taxpayers generate and retain documents that support crossborder intercompany transfer prices.
– IRC § 905(b) and Treas. Reg. § 1.905-2 require that taxpayers maintain and provide information necessary
to substantiate foreign tax credits, including certified translations of any required foreign documents.
– IRC § 964(c) and the regulations thereunder require that each person who is a U.S. shareholder of a
controlled foreign corporation (“CFC”) maintain such records and accounts needed to carry out the
provisions of Subpart F and Subpart G.
– IRC §§ 6038, 6038A, and 6038C require information reporting and record keeping requirements related to
foreign entities.
– Taxpayers maintaining books and records outside the U.S. must substantiate transactions as if such records
were maintained in the U.S.
 At a minimum, these documents must be retained until the statute of limitations for the taxable
year to which they apply closes.
 There may be reasons for keeping documents longer (e.g., formation documents, depreciation,
substantiation, whistleblower cases), and such documents should be identified to avoid
inadvertent destruction.
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Goals for the Audit
 Maintain a good relationship with the exam team.
 Manage and control the audit process.
– Know when and how to escalate.
 Currency.
– Complete the audit within a reasonable time.
 Resolve most issues on a reasonable basis at examination level.
– Identify and seek to address directly with the decision maker.
– Concede where feasible to gain ground on more difficult issues.
 Where appropriate, prepare and preserve difficult issues for IRS Appeals
or litigation.
 Know what issues can be resolved at what levels.
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The CAP Program
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CAP: Overview and Recent
Developments
 CAP is a real-time audit program that seeks to resolve the tax treatment of all or most return
issues before the tax return is filed.
 According to a recent IRS customer satisfaction survey, 94% of CAP taxpayers reported
overall satisfaction, 89% said the program increased tax certainty, and 83% said they were
satisfied with issue identification and issue resolution.
 As of June 2014, there were 185 taxpayers in CAP, 64 taxpayers in CAP maintenance, and
20 taxpayer in pre-CAP.
 CAP has three components:
– Pre-Cap – provides interested taxpayers with a roadmap of the steps required for gaining entry into
CAP.
– CAP – standard real-time audit program.
– CAP Maintenance – intended for taxpayers who have been in CAP, have fewer complex issues, and
have a track record of working cooperatively and transparently with the IRS.
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CAP: Overview and Recent
Developments
 Follows new IDR Directive on issuing IDRs (discussed below).
 A separate, nonnegotiable memorandum of understanding (MOU) is filed for each tax year
(available at http://www.irs.gov/pub/irs-utl/capmou-final.pdf).
– Required taxpayer disclosures.
– Materiality thresholds and identification of items or issues for review.
– Standards for communications between the taxpayer and the IRS.
– Level of review by the IRS.
– Process for identifying and resolving issues.
– Complex transfer pricing issues may not be resolved pre-filing.
 The IRS takes the position that the CAP review
– Is not an “examination” for purposes of I.R.C. § 7605.
– Is an “examination” for purposes of the change in accounting method rules, starting when the MOU is
executed. See Rev. Proc. 2011-14, § 3.08(5).
 Fast Track Settlement (discussed below) is encouraged as a means to resolve unagreed issues.
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The Examination
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Goals of an IRS Examination
 Taxpayer’s Perspective
– Resolution of issues.
– Quality examination.
– Manage and control the audit
– Timely completion.
process.
– Optimized use of
– Favorable result.
resources.
– Minimized cost and burden.
– Exam must now justify
– No surprises.
when they do not assert
– Where appropriate, prepare
penalties.
and preserve difficult issues
for IRS Appeals or litigation.
 IRS’s Perspective
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Commencing the Examination
 The Code authorizes the IRS to “examine any books, papers, records, or other data
which may be relevant” in order “to ascertain the correctness of any return.” IRC §
7602(a).
– The IRS had broad examination powers, limited only by the requirement that the time and place of
examination be “reasonable under the circumstances.” IRC § 7605.
– This examination power extends to information in all forms – documents, electronic and magnetic
media, computer programs and files, e-mails, even direct testimony. This includes documents and
other information maintained by the taxpayer or an affiliate outside the U.S. IRC § 6038C.
 The Examination is typically conducted by a team of IRS personnel (the “exam team”)
comprised of Revenue Agents and specialists (e.g., international, valuation,
economics, transfer pricing). The Exam Team may include outside experts.
 The Examination typically begins with a conference and the preparation of an audit
plan.
 At the outset, it is wise to develop a working relationship and establish ground rules for
the examination.
– Rules for access to documents, use of company facilities, contact persons for both sides.
– Discuss target response times for information requests, target date for completion of examination,
and circumstances – if any – under which the taxpayer will extend statute of limitations.
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Commencing the Examination
(continued)
 The IRS uses different tools to obtain the desired information,
including:
– Information and Document Requests (“IDRs”).
– Foreign Document Requests (“FDRs”).
– Site visits.
– Interviews.
– Administrative Summons.
– Information from Third Parties.
 Certain standard IDRs are issued to all taxpayers (e.g., “listed
transactions” IDR, IDR requesting accounting records).
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Preliminary IRS Fact Gathering
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IDRs and Document Production
 During an audit, the IRS requests information and documents by issuing
Information Document Requests (“IDRs”), conducting interviews, and making site
visits.
 The IRS is entitled to inspect original documents; it cannot be forced to accept
copies.
 Some IDRs specify that the requested information be provided in native format.
 It is wise policy to insist that all requests for information or documents be in
writing.
 The IRS is entitled to request and receive any document that may be relevant to
determining the correct tax liability.
 “Relevance” is defined very broadly for this purpose.
– The test is “relevant or may lead to the discovery of relevant evidence.”
– The standard is thus potentially relevant, not actually relevant. It is broader than the
standard for relevance in litigation.
– Documents may be relevant even if they were not used to prepare the return.
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Definition of “Document”
 The term “document” is extremely broad and encompasses all business records. The
following are considered “documents”:
– Computer records and e-mails are considered documents.
– Drafts and old versions of documents are considered to be documents separate from the final
version.
– Multiple copies of a document, if marked with notes and comments, are also considered separate
documents.
– Supporting spreadsheets and calculations are considered to be documents separate from the
summary schedule that they support.
 The breadth of this definition underscores the importance of a good document retention
policy, which should specify the types of documents to be retained, the manner in which
they will be stored, and the length of retention.
 The IRS cannot require the creation of documents, it is only entitled to pre-existing
documents.
– In some situations, it may be advisable to create documents to ensure that the IRS correctly
understands issues and does not engage in a “fishing expedition.”
– Goal is to avoid the IRS misunderstanding the facts and proposing an erroneous adjustment based
on an incomplete picture.
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From a recent IDR …
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New IDR Rules
 In February 2014, the IRS revamped its IDR process for
LB&I. See LB&I-04-0214-004 (Feb. 28, 2014). The directive
superseded two prior directives issued in the second half of
2013.
 The new process contains requirements for (1) issuing IDRs
and (2) enforcing IDRs.
 All LB&I examiners and specialists have completed
mandatory training.
 Represents a fundamental change in the process.
 The new process is mandatory and has no exceptions.
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IDR Issuance Process

Discuss the issue related to the IDR with the taxpayer.

Discuss how the information requested is related to the issue under consideration and why it is necessary.

After this consultation with the taxpayer, determine what information will ultimately be requested in the IDR.

Ensure the IDR clearly states the issue that is being considered and that the IDR only requests information relevant to the
stated issue. An IDR issued at the beginning of an examination that requests basic books and records and general
information about a taxpayer’s business is not subject to this requirement 4. Once this initial IDR has been issued,
subsequent IDRs must state an issue in compliance with this requirement 4.

Prepare one IDR for each issue.

Utilize numbers or letters on the IDR for clarity.

Ensure that the IDR is written using clear and concise language.

Ensure that the IDR is customized to the taxpayer or industry.

Provide a draft of the IDR and discuss its contents with the taxpayer. Generally, this process should be completed within 10
business days.

After this discussion is complete, determine with the taxpayer a reasonable timeframe for a response to the IDR.

If agreement on a response date cannot be reached, the examiner or specialist will set a reasonable response date for the
IDR.

When determining the response date, ensure that the examiner or specialist commits to a date by which the IDR will be
reviewed and a response provided to the taxpayer on whether the information received satisfies the IDR. Note this date on
the IDR.
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Negotiating Terms of an IDR - Objectives
 Clarity and Precision.
– Knowledge of issue, documents and resources.
– Order and focus of information.
 Scope of Search.
– Comprehensive v. multiple IDRs.
– Final documents v. drafts.
– Documents v. Emails.
– Privilege logs and litigation holds.
 Manageable Timetable.
– Individual IDRs.
– Installments.
– Cumulative and overlapping obligations.
 Pro-Active v. reactive approach.
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IDR Enforcement Process
 Before the enforcement process is triggered, an examiner has authority to grant an extension of up to 15
business days to provide a response or cure an incomplete response. If, after extension, the IRS
believes that the taxpayer has not adequately responded, the enforcement process is triggered with three
graduated steps.
 Step 1: The Delinquency Notice.
–
If the taxpayer fails to respond or does not provide a complete response by the response date, a Delinquency Notice
will be issued.
–
Provides additional response date generally no more than 10 days from date of Delinquency Notice.
 Step 2: The Pre-Summons Letter.
–
If the taxpayer does not provide a complete response by the due date in the Delinquency Notice, a Pre-Summons
Letter will be issued.
–
Must be issued no later than 10 days after the due date in the Delinquency Notice.
–
Provides a response date that is generally 10 days from the date of the Pre-Summons Letter.
 Step 3: The Summons.
–
If the taxpayer does not provide a complete response by the due date in the Pre-Summons Letter, a summons will be
issued.
–
The taxpayer must either comply with the summons or face the risk of an enforcement action by the IRS in district
court.
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IDR Timeline
Per
agreement
10 days
Draft
IDR
Final
IDR
Up to
5 days
IDR
Due Date /
IRS Review
Date
Up to
15 days*
Discuss
Extension
10 days
Extended
IDR
Date
10 days**
10 days
10 days***
No specified
Limit
Delinquency Delinquency PreSummons PreSummons Summons
Notice
Notice
Letter
Letter Response Issued
Response
Date
* At discretion of examiner
** Can be extended by
Territory Manager
*** Can be extended by DFO
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Responding to an IDR –
Strategic Consideration
 Proactive v. reactive approach.
 Consistency of responses with each other and with legal
position.
 Avoid suggesting additional inquiries.
 Evidentiary effect of admissions.
 Anticipate Appeals protest.
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Responding to IDRs
 IDRs may request narrative answers to questions, seek confirmation of
information, and/or seek responsive documents.
– IDRs should be read closely to determine whether ambiguous, incomplete, or
inappropriate.
– Care should be taken to respond appropriately, and the taxpayer must determine
whether to comply narrowly or broadly.
– Privileged or protected information and documents must be preserved to avoid any
waiver issues.
– The taxpayer is not required to “create” information or to produce it in a form in which it
is not ordinarily maintained.
– The taxpayer is not required to produce information it does not possess; there is no
obligation to seek out requested information from unrelated parties.
 When asked for a document, the taxpayer must:
– Comply;
– State that it is unable to comply (e.g., because the requested document does not exist);
or
– Assert an appropriate privilege against disclosure.
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Responding to an IDR –
Information Sources
 Tax Files.
– Preparation v. advisory.
– Opinions and internal reliance memoranda.
 Operations Files.
– Scope and availability.
– Potential witnesses.
 Public Information.
– Websites.
– SEC filings.
– Annual Reports.
 Former Employees.
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IRS Can Seek Foreign-Based Documents and
Information
 U.S. Parent—Foreign Subsidiary.
– IRC § 982 - prohibits the introduction by the taxpayer of any foreign-based documentation requested
by the IRS through an FDR and not provided to the IRS by the taxpayer.
 Foreign Parent—U.S. Subsidiary.
– IRC § 6038A - requires the foreign parent to maintain and furnish to the IRS specified information
and documents.
– IRC § 6038C - requires foreign corporations engaged in United States business to maintain and
furnish to the IRS specified information and documents.
• Noncompliance under either provision subjects the affected corporate taxpayer to financial
penalties and to determinations as to allowed deductions or tax treatment in the “sole discretion”
of the IRS based on its “own knowledge” or such information as it may otherwise obtain.
 Information Exchange Treaties.
– The U.S. currently has information exchange agreements with 78 foreign countries. See Rev. Proc.
2012-24.
 Other Code provisions - Allow IRS to obtain information from foreign entities and nonresident aliens
who bring a tax deficiency action in the Tax Court.
– IRC § 7456(b) - provides that the Tax Court, on a showing of good cause, shall order a petitioner that
is a foreign entity or nonresident alien individual to make available to the IRS such documents as the
court deems relevant, wherever situated, or to provide sufficient proof of why the petitioner is unable
to comply; failure to comply can result in a default judgment or other sanctions.
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Joint Tax Audits
 It has been reported that the IRS is engaged in a handful of joint audits
with Australia and is in conversations to begin similar joint audits with
agents in Britain and the Netherlands.
 Elements:
– Single audit team composed of members of two or more tax administrations
(including competent authorities).
– Cross-border transaction.
– One or more taxpayers (usually related parties).
 Issues:
– Language difficulties for standard formats and joint representations by the taxpayer.
– Domestic authorization for the presence of foreign auditors.
– Cost sharing issues.
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Simultaneous Examination Program
 The simultaneous examination program (SEP) operates
through the exchange-of-information provisions of income tax
treaties and tax information exchange agreements (TIEAs).
 Simultaneous examinations involve the United States and
one of more of its tax treaty or TIEA partners conducting
separate, independent examinations of the taxpayer or a
related taxpayer within their jurisdictions.
 Intended to determine the correct tax liabilities of the
taxpayer and/or related entities and facilitate exchanges of
information and mutually secure other tax compliance
benefits.
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Simultaneous Examination Program
(Cont.)
 The SEP is coordinated through the U.S. Competent Authority.
 Simultaneous examinations may be carried out pursuant to written
working arrangements entered into by the Director, International (LMSB)
and the Competent Authorities of one or more U.S. tax treaty or TIEA
partners.
– United States currently has working arrangements with Australia, Canada, France,
Germany, Italy, Korea, Japan, Mexico, Norway, Philippines, Sweden, and the
United Kingdom.
 A simultaneous examination may also enable taxpayers to make a
request for Competent Authority consideration at an earlier stage than
might otherwise have been the case.
 However, a simultaneous examination is not a substitute for the
Competent Authority process under tax treaty mutual agreement
procedures.
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Simultaneous Examination Program
(Cont.)
 Proposals for simultaneous examination may be initiated by either the United States or
 a tax treaty or TIEA partner.
 U.S. taxpayers who have been accepted for simultaneous examination will be
informed of the fact by the manager responsible for the U.S. examination.
 Since simultaneous examinations are independent examinations conducted by each
of the participating countries according to their own laws and procedures, the
taxpayer's consent to a simultaneous examination is not required.
 Historically, there have been few actual simultaneous examinations of multinational
taxpayers.
– This is likely because it is often difficult to coordinate and identify specific multinational taxpayers that
are appropriate for these examinations and to coordinate audit cycles among the two taxing
jurisdictions.
– However, the United States and some of its significant treaty partners have recently expressed an
interest in expanding the frequency of simultaneous examinations, especially in connection with
transfer pricing transactions that have become increasingly important in the Service's international
examination program.
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Site Visits
 The IRS may visit a taxpayer’s place of business to establish facts that can only be established by
a direct visit (e.g., inventory or asset verification). The visit generally is during normal business
hours on a workday.
 Purposes:
– Acquire an overview of the business operations.
– Establish that books and records reflect business operations.
– Observe and test internal controls.
– Clarify information received through interviews.
– Identify potential audit issues.
 Factors for IRS to consider:
– Cost effectiveness and practicality of conducting visit.
– Viable alternatives to visit (e.g., video tape of premises or operations).
– Taxpayer can request that a different site be visited.
 Failure to acquiesce in a request for a site visit can result in the issuance of a summons.
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Interviews
 The IRS may request an interview of taxpayer personnel.
 Interviews are generally designed to provide information regarding the taxpayer’s financial history,
business operations, and books and records that might not otherwise be available.
 The time and location of the interview is set by the examining agent, generally subject to the convenience
and availability of the interviewee.
 Examining agents are trained to utilize various interview techniques.
–
Eye contact.
–
Leading or open-ended questions.
–
Use of silence.
–
Observation of body language.
 Recording the interview (IRC § 7521(a)).
–
The taxpayer has the right, upon advance notice, to make an audio recording of the interview.
–
The IRS may record the interview, provided the taxpayer is informed of the recording prior to the interview and, upon
request, the taxpayer is provided with a transcript or copy of the recording.
 Taxpayer should request a list of questions in lieu of an interview or, at a minimum, the topics to be
covered.
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Do and Don’t for Witnesses

Tell the truth.

No-Win situation.

Listen to the question.

Make sure you understand the question.

Pause before answering.

Listen to objections/instructions not to answer.

Reviewing documents/refreshing recollection.

Do not speculate.

Answer concisely and precisely.

Breaks/consultation.
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IRS Third Party Interviews
 Taxpayers should send a written request to the IRS for a list
of third party contacts.
 Anticipate IRS third party interviews of contract
manufacturers during examination of Section 199 deduction.
– Send letter to contract manufacturers asking for notice if contacted by
the IRS.
 Make a written request to be present for the interview.
 FOIA request for transcript or meeting notes.
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Administrative Summons
 If the IRS believes that requested information have not been provided, it may
issue a summons to the taxpayer.
 If the information is still not provided, the IRS may move to enforce the
summons in district court or the taxpayer may move to quash the summons.
 In U.S. v. Powell, 379 U.S. 48,57-58 (1964), the Supreme Court listed four
requirement for the IRS to make a prima facie case for enforcement of an
administrative summons:
–
The investigation must be conducted for a legitimate purpose;
–
The summons must be relevant to that purpose;
–
The IRS must not already have the information sought; and
–
The IRS must have followed the administrative steps required by the Internal Revenue Code.
 To make the required showing, the IRS usually submits an affidavit from the
examining agent.
 Issuance of a summons is a serious matter and may signal a breakdown in
communication with the Exam Team.
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New Summons Regulations
 TD 9669, released June 18, 2014.
 Proposed and Temporary Regulations modifying rules under
section 7602(a).
 Clarified that experts contracted by the IRS pursuant to
section 6103(n) may participate in summoned interviews,
propound questions and receive summoned records.
 Available at http://www.irs.gov/irb/2014-28_IRB/ar09.html.
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Third-Party Summons
 The IRS can also issue a summons to a third party. IRC § 7609.
– Officers and employees of the taxpayer are not third parties.
 The IRS must notify the taxpayer within 3 days of the service date of the
third-party summons. IRC § 7609(a).
 The response date cannot be less than 24 days after notice is given to the
taxpayer.
– The summoned party may not comply with the summons during this 24-day period.
– If it does, the IRS cannot accept any information sought in the summons.
 The taxpayer has the right to intervene. It also has the right to seek to quash
the summons not later than 20 days after receiving notice. IRC § 7609(b).
 If the summoned party fails to respond, the IRS may file an enforcement
action in Federal District Court. The taxpayer has the right to intervene in
that proceeding.
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Audits Can Be A Two-Way Street
 Request Your Administrative File.
–
–
–
–
IRM and IRC permit disclosure during Exam. See IRC §6103(e); IRM 4.2.5.7.
Only exception is if disclosure “would seriously impair tax administration.”
Taxpayers have “the right to information used in determining his or her tax liability.”
Impairment determinations are made at the supervisory level and should not be narrowly construed
to prevent the release of all information.
 FOIA Request.
– If and when to use?
– Pros and cons?
 IRC § 6103.
– IRS cannot disclose taxpayer information.
– Lots of exceptions.
 IRC § 6110.
– Written determinations and background documents, required redaction of taxpayer information.
– Chief Counsel Notice CC-2014-009 (Sept. 22, 2014) – Guidance for processing National Officereviewed field advice for public inspection.
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Special Considerations in State Audits
 Similar approach as to IRS audits.
 Subpoenas.
– Be familiar with state procedural rules for enforcement.
– Third party subpoenas.
 Privileged documents.
– Number of states doe not recognize accountant-client privilege.
 Requests for 50 state apportionment workpapers or returns.
 MTC audits.
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The Notice of Proposed Adjustments
 As the audit proceeds, proposed adjustments are reflected in NOPAs –
Notices of Proposed Adjustments (Forms 5701).
 NOPAs are issued as the IRS develops reasonable grounds establishing
that they feel a proposed adjustment is in order.
 The taxpayer responds to all NOPAs and indicates agreement or
disagreement with the proposed adjustment and the reasons why.
 NOPA Contents:
– Quantifies adjustment.
– Facts & analysis underlying adjustment.
– Supporting economist and expert reports.
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Closing the Examination
 Revenue agents have limited authority to settle issues. For certain issues (e.g.,
coordinated issues, listed transactions), settlement guidelines may further limit the
agent’s authority.
 Agents are instructed not to settle issues based on hazards of litigation.
IRM 4.10.7.5.2.1(5).
– Exception exists if the parties agree to utilize the Fast Track Settlement procedure, discussed later.
 The taxpayer or the agent may request guidance from the IRS National Office.
– In some cases (e.g., TAMs), the exam team and the taxpayer file written submissions on the facts
and applicable law.
– In some cases (e.g., CCAs, FSAs), only the exam team files a submission.
– A conference is sometimes held on the issue.
– The exam team must follow the technical advice issued by the IRS National Office.
 The taxpayer should request a closing agreement as to issues that have been
resolved, especially if they affect later tax years.
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Closing the Examination (continued)
 If at least one issue remains unagreed, a Revenue Agent’s Report
(“RAR”) and a 30-day letter informing the taxpayer of its Appeals rights
are issued.
 The RAR contains all the proposed adjustments (agreed and unagreed)
and a computation of tax liability. The taxpayer has 30 days to submit a
Protest to the IRS Appeals Office.
 The issuance of the 30-day letter triggers the running of “hot interest” on
large corporate underpayments. IRC § 6621(c)(2).
 Option upon receipt of 30-day letter:
– Agree with proposed adjustments and waive right to go to the Tax Court by signing
Form 870 (still preserves right to file a refund claim).
– Ignore and either wait for Notice of Deficiency to go to Tax Court or pay tax and file
a refund claim.
– File Protest and proceed to IRS Appeals.
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Closing the Examination
on an Agreed Basis
 Form 590 (No Change Letter).
 IRC § 7605(b) states, “only one inspection of a
taxpayer’s books of account shall be made for each
taxable year . . . unless the Secretary, after
investigation, notifies the taxpayer in writing that an
additional inspection is necessary.”
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Form 870: Waiver of Restrictions
on Assessment
 Allows Exam to assess and collect the tax on the agreed issues.
 Taxpayer loses its right to go to Appeals or to petition the Tax Court.
 Allows the taxpayer to file a refund claim after paying the assessed tax.
 Avoids the imposition of hot interest under section 6621(c).
 Section 6601(c) suspends interest if the IRS does not make the assessment
and issue notice and demand within 30-days of taxpayer's submission of Form
870.
 A sufficiently detailed Form 870 can constitute a valid claim for refund for
purposes of extending the statute of limitations. Rev. Rul. 68-65.
 Not legally binding on IRS or Taxpayer as long as statute of limitations remains
open.
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Closing Agreements

A closing agreement may be entered into in any case in which there appears to
be an advantage in having the case permanently and conclusively closed, or if
good and sufficient reasons are shown by the taxpayer for desiring a closing
agreement and it is determined by the Commissioner that the United States will
sustain no disadvantage through consummation of an agreement. Reg. §
301.7121-1(a).

Closing agreements bar the filing of refund claims under contract principles (as
opposed to under equitable estoppel) and can be rescinded only on a showing of
fraud, malfeasance or misrepresentation of a material fact. IRC § 7121(b).

Form 866 (Agreement as to Final Determination of Tax Liability): Finalizes a
taxpayer's entire liability for the tax period at issue.

Form 906 (Closing Agreement on Final Determination Covering Specific Matters):
Finalizes the treatment of specific issues.

Form 866 and Form 906 may be used in combination for the same case.

Common use of Closing Agreements is in Fast Track Settlement.
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Closing the Examination
on an Unagreed Basis
 30-Day Letter and Revenue Agent’s Report (RAR).
–
–
–
–
Issued at the end of the audit.
Essentially a repackaging of the NOPAs.
The taxpayer’s ticket to IRS Appeals.
Often requires extension of statute of limitations (i.e., at least 18 months
on Form 872).
 Notice of Deficiency.
– Issued at end of IRS administrative process (or at the end of the audit).
– The taxpayer’s ticket to the Tax Court.
• Deficiency forum – No payment of tax, penalty or interest (if any) until a
case is final.
 Either can be the taxpayer’s ticket to a refund forum.
– Court of Federal Claims or Federal District Court.
– Must pay tax, penalty and interest, then claim a refund.
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Statute of Limitations
 Ordinarily, the IRS has 3 years from the filing of a return in which to assess
any additional tax.
 Special limitation periods.
– Omission of 25% of gross income – 6 years from filing of return.
– Failure to disclose listed transaction – 1 year from date of disclosure.
– Fraud – no limitation period.
 Extending the limitations period.
– Form 872 (Consent to Extend the Time to Assess Tax): Extends the statute to a specific date.
– Form 872-A (Special Consent to Extend the Time to Assess Tax): Indefinite extension until 90
days after either party files (Form 872-T) or tax deficiency assessment made.
– Taxpayer should consider use of “Restricted Form 872” to narrow adjustments at issue.
 The limitations period is tolled by the issuance of a valid notice of deficiency.
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Appeals
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Appeals Strategy Options
 Tax controversy is not necessarily linear in movement:
– Case can move forward, backward or sideways.
– Large cast of potential decision makers.
 Important strategic decisions: choosing or moving between possible options in
order to best position case for favorable resolution.
 One procedural option: Bypass Appeals and go directly to the Tax Court.
– Lock the IRS into a poor position taken by Exam; IRS will have to assume the burden of proof on any
position not taken in the Notice of Deficiency.
– All or nothing issue.
– Force IRS to take an official position on issue.
 Important consideration in bypassing Appeals:
– Referral to Appeals in response to a 30-day letter is of right – so long as there is sufficient time
remaining on the limitations period, the IRS cannot say “No.”
– Referral to Appeals after a case has been docketed with the Tax Court is discretionary with the IRS –
the IRS can say “No” to some or all of the issues in the case.
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Case Progression Options
EXAMINATION
Rapid Appeals Process
----------------------------------Early Referral to Appeals
Bypassing
Appeals
Fast Track
Normal Progression
---- ADR Options
APPEALS
Post Appeals Mediation
----------------------------Post Appeals Arbitration
Docketed
Appeals Case
LITIGATION
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New Appeals Options
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Avenues To Appeals
 Protest of Revenue Agent Report.
 Docketed case Appeals.
 Fast Track Settlement or Mediation.
 Early Referral.
 Rapid Appeals.
 Competent Authority.
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Fast Track Settlement
 Technically still an Exam function, but involves interaction with an Appeals Officer.
 Established by Rev. Proc. 2003-40.
 The process is started after all NOPAs, but before the 30-day Letter.
 Fast Track is generally not available for:
– Issues designated for litigation.
– Issues for which a taxpayer has requested Competent Authority assistance.
– “Whipsaw” issues.
– Issues that have been excluded from the program by a Chief Counsel Notice or equivalent
publication.
 Both parties must agree to participate (exception for CAP taxpayers).
 The taxpayer and the team manager “apply” to the program by executing a Fast Track
Agreement form. A formal Protest is not required, but the taxpayer and Exam typically
submit position papers.
 The goal is to complete the entire Fast Track process within 120 days.
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Fast Track : Appeals’ Function
 The taxpayer and Exam must each have a participant with decision-making
authority.
 An ATCL or Appeals Officer trained in mediation is assigned to facilitate a
settlement, but does not perform a traditional Appeals role. Appeals “lends” its
settlement authority – including hazards of litigation – to Exam.
 Although Appeals participates in the Fast Track process, the case remains
within LB&I’s jurisdiction and is not transferred to Appeals.
 At a session attended by the taxpayer and Exam, the Appeals mediator uses
dispute resolution techniques to facilitate a settlement between the taxpayer
and the exam team. The prohibition against ex parte communication between
Appeals and Exam does not apply during Fast Track.
 Either party may withdraw from participation in the program.
 Any settled issues are incorporated into a closing agreement.
 Participation in Fast Track does not prejudice a taxpayer’s access to any other
IRS programs or settlement initiatives, including traditional Appeals.
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Early Referral to Appeals
 Established by Rev. Proc. 99-28.
 May be able to settle tough issue before 30-day letter & “hot” interest rules kick in;
settling tough issue might “kick start” audit.
 Requires agreement of both taxpayer and Exam; otherwise follows normal
Appeals procedures.
 Allows settlement negotiations without Exam sitting at the table (different from
Fast Track and Rapid Appeals).
 Unlike Fast Track, Early Referral constitutes a taxpayer’s resort to Appeals.
 If audit concludes while early referral issue still under Appeals discussion, case
converts to normal Appeals case.
 Declining in use with increased taxpayer participation in Fast Track.
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Rapid Appeals Process
 Requires agreement of both taxpayer and Exam.
 Like Fast Track, Exam is directly involved and engages in the
process by presenting issues during the joint session and
engaging in separate caucus session discussion with Appeals.
 Unlike Fast Track, Appeals is the decision maker for the IRS on
the disputed issues; Appeals has the responsibility
for evaluating the hazards of litigation.
 Like Early Referral, Rapid Appeals constitutes the taxpayer’s
resort to Appeals.
 Either party may withdraw from the Rapid Appeals process at
anytime.
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IRS Appeals
 Appeals is the IRS’s primary settlement forum.
– Appeals’ mission – fair resolution based on litigation hazards.
– Appeals Officer attempts to place value (e.g., 40%/60%) on IRS litigating
hazards.
– Appeals or Taxpayer should concede a factually or legally weak adjustment
(i.e., the “20% Rule”).
 Appeals Judicial Approach & Culture.
– New program (“AJAC”).
– Grew out of problems in collection cases.
– Trying to force Exam and collection to develop cases.
– Appeals strongly discouraged from raising or considering new issues.
– New evidence will be returned to Exam for consideration.
– Stressing a more judicial approach at Appeals.
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The Appeals Process
 The Appeals process is started when the taxpayer files a Protest enumerating the proposed
adjustments being challenged and factual and legal support for each challenge. The Exam
Team is usually given the opportunity to submit a rebuttal to the Protest.
 The process involves one or more conferences with the Appeals Officer or Appeals team.
– Small cases generally have one Appeals Officer.
– Larger cases may have a team, which will include the Team Chief and one or more
Appeals Officers, who will often be specialists (e.g., accounting methods, financial
products, international).
 The Exam Team usually appears at the first conference and presents its case to the
Appeals Officer. After that, the Appeals Officer is prohibited from having ex parte
communications with other IRS personnel about the taxpayer’s case.
 The taxpayer, its counsel, and expert consultants may all be involved in the Appeals
Conference.
 Unlike the Exam Team, the Appeals Officer is authorized to consider hazards of litigation.
This can lead to negotiation and “horse trading.”
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Creative Approaches to Settlement
 Split an issue based on percentages (hazards of litigation).
 Concede an issue for some years but not others.
 Concede an issue in exchange for a timing benefit.
 Bottom-line dollar agreement.
 Trade issues: Use issues of “principle” as bargaining chips
for issues of dollar value.
 Interest abatement.
 Be sure to resolve penalties.
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Persuade Before Making a Settlement
Proposal
 Stress hazards of litigation.
 Is there anything else you would need to
see…?
 Have you discussed the strengths and
weaknesses in English, as opposed to
percentages?
 Identify Appeals Officer’s settlement range.
 Are there other factors such as future years,
state taxes or Joint Committee review?
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Support the Settlement
 Provide whatever the Appeals Officer needs to
resolve an issue.
– Affidavits.
– Briefs/memos.
– Appraisals.
 Be timely.
 Make the Appeals Officer look good.
 Discuss potential interest abatement.
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Resolution of Cases at Appeals
 Fully agreed case: all issues resolved.
 Partially agreed case: unagreed issues reserved for litigation in the
Tax Court, Federal District Court, or Court of Federal Claims.
Issuance of Notice of Deficiency by Appeals.
 Dealing with continuing issues:
– Examination has discretion to adopt Appeals settlement of continuing
issue.
– Negotiate a closing agreement that resolves issues for future years.
– Advance Issue Resolution (“AIR”) with Exam.
– Gauge Appeals’ willingness to settle the issue on same basis for subsequent
years; if so, address in Appeals Case Memorandum (“ACM”).
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Closing Appeals Case
on an Agreed Basis
 Form 870-AD (Offer to Waive Restrictions on Assessments and
Collection of Tax Deficiency and to Accept Overassessment).
– Permits the Service to assess the tax, but generally prohibits refund claims
for issues agreed upon by the parties.
– These forms are used only by Appeals (not by Exam), and are typically used
for settlements in which both the IRS and the taxpayer are conceding
something in order to settle the case (i.e., mutual concession settlements).
 As a precautionary measure, if there are specific but unrelated
refund issues, a taxpayer should insert a provision (a reserve
clause) on the Form 870-AD, reserving the right to file a refund
claim for these issues before signing the form.
 Form 870-AD expressly allows carryback claims.
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Closing Appeals Case
on an Unagreed Basis
 Taxpayer’s recourse if settlement negotiations fails.
– Post Appeals Mediation. Rev. Proc. 2002-44 & 2009-44.
– Post Appeals Arbitration. Rev. Proc. 2006-44.
– Litigation.
 Biggest risk of unsuccessful appeals negotiations – IRS
position may get stronger in litigation!
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Post-Appeals Mediation
 Section 7123(b)(1) & Rev. Proc. 2009-44.
 Post-Appeals Mediation is available after other Appeals settlement
negotiations have failed.
 Broad availability for legal issues, factual issues, certain coordinated issues,
early referral issues, Competent Authority issues (prior to a request to the U.S.
authority).
 Post-Appeals Mediation is not available for:
– Issues docketed in any court or designated for litigation.
– Collection cases.
– “Whipsaw” issues.
– Issues deemed frivolous.
– Taxpayers who do not act in “good faith” during Appeals.
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Post-Appeals Mediation
 Taxpayer initiated, but subject to approval by Appeals. If approval is granted,
taxpayer and Appeals execute a written agreement that:
– Specifies issues to mediate.
– Includes an initial list of witnesses, attorneys, representatives, and observers.
– Identifies the location and proposed date of mediation.
– Prohibits ex parte contact with the mediator.
 An Appeals ATCL is assigned to act as a mediator. The taxpayer may, at its
own expense, add a second mediator.
 Each party must have a participant with decision-making authority.
 Each party submits a discussion summary in advance of the session to the
mediators.
 Either party may withdraw from the process.
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Post-Appeals Mediation
 If Settlement is reached, a Form 906 will be used to close
the case.
 If Settlement is not reached:
– Appeals will not reconsider the mediated issue.
– The parties may request arbitration, if the matter
otherwise qualifies for arbitration (arbitration rarely used
due to its binding nature).
– Absent arbitration, Notice of Deficiency will be issued.
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State Controversies: Choice of Forum
 Choices between Administrative and Court Options
– Is payment required?
– Where can you win? Where can you settle?
– Where is the record made? When is it public?
– How do rules of evidence apply?
– Which choice is less expensive/faster?
– What is the standard of review on appeal?
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State Controversies: Choice of Forum
 Choices between Courts.
– Tax or generalist judge.
– Venue: Is one county more taxpayer favorable?
– Differences between appellate courts.
 Choices between States.
– Differences in law/procedures.
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Litigation
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The Notice of Deficiency
 If an agreement is not reached at Exam or Appeals, the IRS will issue a Notice of
Deficiency.
 The Notice of Deficiency must set forth all the adjustments to the taxpayer’s
income and credit, the resulting deficiencies in tax, and any penalties that are
being asserted. The Notice is supposed to provide an explanation for each
determination in the Notice. IRC § 7522.
 The issuance of the Notice of Deficiency is a statutory prerequisite to the
assessment and collection of any deficiency in tax. IRC § 6212.
 The issuance of a valid Notice of Deficiency suspends the running of the statute
of limitations. IRC § 6503(a).
 A taxpayer located in the U.S. has 90 days from the mailing of the Notice of
Deficiency in which to file a petition with the Tax Court; a taxpayer located outside
the U.S. has 150 days. IRC § 6213(a). This period cannot be extended.
 State notices of deficiency have varying dates for response.
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Litigation: Introduction
 Choice of Forum
 Timing of Commencement of
Suit
 Strategic Allies
 Other Strategic
Considerations
 Case Preparation and Tactics
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
Strategic Use of Experts

Discovery

Privileges

Pre-Trial Procedures

Trial

Briefing

Settlement
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Litigation Options
 Receipt of the Notice of Deficiency presents the taxpayer with a critical litigation
decision.
– File a petition with the Tax Court, which prevents the IRS from assessing and collecting until the case
is resolved. IRC § 6213. Must be done within 90 days.
– Pay the asserted tax, penalties (if any) and interest, claim a refund, and bring suit in Federal District
Court or the Court of Federal Claims upon the later of (i) denial of the refund claim; and (ii) 6 months
after filing the claim.
 Factors:
– Governing precedent.
– Differing procedural rules.
– Discovery and litigation costs in different courts (e.g., general disfavor of depositions in the Tax
Court).
– Ability or desire to pay now or later; interest continues to accrue while a case is litigated in the Tax
Court, although payment can be made to stop the running of interest once the case is docketed.
– Identity of opponents: IRS Chief Counsel attorneys in the Tax Court; Department of Justice Tax
Section lawyers in the refund forums.
– Reputation in local community; potential issue in a refund suit: jury trial?
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Tax Court
 Possible Advantages:
– Do not have to pay.
– Less risk of new issues.
– The judges are tax specialists.
– Less rigorous discovery.
– Potentially easier to settle (particularly if there are multiple issues).
– Stipulations are strongly encouraged, perhaps making trial less costly.
– Broad jurisdiction (helpful if there are strategic allies).
 Possible Disadvantages:
– The court is very hostile towards arrangements that might be regarded as a “tax
shelter.
– Jury trials not available.
– The judges are less equity-oriented, i.e., more concerned about the impact of the
decision on the tax system as a whole.
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Court of Federal Claims
 Possible Advantages:
– Precedent may be favorable.
– Court of Appeals for the Federal Circuit is often receptive to equitable or nontechnical arguments.
– Judges hear numerous tax cases.
– Broad jurisdiction (helpful if there are strategic allies).
 Possible Disadvantages:
– Rigorous discovery.
– Must pre-pay tax and penalties.
– Government can raise new issues.
– Precedent may be unfavorable.
– Too slow (depending on judge).
– No jury trials.
– Settlement possibly more difficult.
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Federal District Court
 Possible Advantages:
– A jury trial is available.
– District Court Judges tend to be generalists, probably enhancing the role of
equity.
– The court is located in the taxpayer’s locale, possibly making pretrial proceedings
more convenient, and possibly having a favorable influence on the judge.
– Often there is no case law on point.
– Favorable view of taxpayer in “home town.”
 Possible Disadvantages:
– Potential adverse publicity in “home court.”
– Easier for Government to raise new issues.
– Have to pay first.
– Judge may have no tax expertise.
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Timing of Commencement of Suit
 Tax Court.
– Must file within 90 days of the Notice of Deficiency.
 District Court or Court of Federal Claims:
– Six months after claim or after notice of disallowance.
– Must file within 2 years of disallowance or signing of
waiver of disallowance.
– Wagenet suggests 6 year maximum window.
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Strategic Allies
 What is the likely resolution and timetable for
resolution for those other taxpayers?
 Is your major position likely to be factually stronger
or weaker than that of other taxpayers?
 Does the IRS have a coordinated position on your
position or issue?
 Are the IRS’s settlement parameters limited by
settlements made or to be made with other
taxpayers?
 Would you benefit from coordinating your efforts
with those of other taxpayers?
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Other Strategic Considerations
 “Correlative” or related issues that might emerge in
tax years at issue.
 Issues with a timing component.
 International ramifications.
 Impact on in-house personnel.
 Publicity.
 Other.
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Case Preparation and Tactics
 Documents and data.
 Mandatory disclosure rules.
 KISS rule (“Keep It Simple Stupid”).
 Realistically identify the core strengths and weaknesses of your position.
 Know where the proof problems are (for example, a now-hostile former
employee who has key testimony).
 Decide upon a theme, i.e., “tell a story.”
 Weave in equities.
 Prepare witnesses.
 Know your documents.
 Credibility is key.
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Litigation: Trial
 Whether tried in the Tax Court, the Federal District Court, the Court of Federal Claims,
or state tax cases, tax litigation entails the following:
– Filing of pleadings – a petition in the Tax Court; a complaint in Federal District Court or the Court of
Federal Claims; a protest for state administrative forums and a complaint for state courts.
– Discovery (document production, interrogatories, depositions).
– Motion practice, including Summary Judgment where appropriate.
– Stipulations.
– Trial – testimony of fact and, if appropriate, expert witnesses.
– Briefs.
– Post-decision filings.
 Depending on the issues, expert testimony is common. Counsel need to identify the
need for such testimony and to identify and retain appropriate experts.
 Each court has its own rules and, in some cases, unique procedures.
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Litigation: Court of Appeals
 Depending on the issue and the basis for the trial court’s decision, one or both
parties may appeal the case to the United States Court of Appeals.
– From the Tax Court – appeal lies to the circuit in which the taxpayer resided or had its
principal place of business at the time the Petition. In the case of a dissolved
partnership, appeal lies to the D.C. Circuit.
– From Federal District Court – appeal lies to the circuit in which the District Court is
located.
– From the Court of Federal Claims – appeal lies to the Federal Circuit.
 Either party has 90 days from the entry of the Tax Court’s decision or the entry of
judgment by a District Court or the Court of Federal Claims in which to file a
Notice of Appeal.
 Appeal to the Court of Appeals is of right.
 State court cases are appealed to the courts of appeals; some administrative
cases are appealed to trial courts acting as reviewing courts.
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Litigation: Supreme Court
 A decision of the Court of Appeals may be appealed to the Supreme
Court.
 Either party has 90 days from the entry of judgment by the Court of
Appeals in which to file a petition for certiorari with the Supreme Court.
 Appeal to the Supreme Court is discretionary with the Court. It generally
grants certiorari only in the case of:
– An issue the Court deems of great legal or economic importance.
– An issue in which there is a split between Circuits.
 Tax cases are relatively rare on the Supreme Court’s docket, although
there have been a number of tax cases decided in the recent past (e.g.,
Home Concrete, Mayo, Mead).
 Three state tax cases are currently before the Supreme Court.
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Litigation: Settlement
 “If you want peace, prepare for war.”
 It is important to be aware that the initiation of litigation in a tax
case does not foreclose the possibility of settlement.
 Government trial and appellate lawyers have settlement authority,
generally subject to approval by the IRS National Office.
 Do not be afraid to bring up settlement at the right time – you are
not “signaling weakness.”
 A case can be settled at any level of the litigation process – in the
trial court, in the Court of Appeals, even in the Supreme Court.
 In states, consider an “offer of proof” to help state appreciate its
litigating risk.
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Jean A. Pawlow
Jean A. Pawlow
Washington, D.C.
202.756.8297
[email protected]
Harvard Law School,
J.D. cum laude, 1988
University of California
at Berkeley, B.S. with
high honors, 1985
www.mwe.com

Jean A. Pawlow is a partner in the law firm of McDermott Will & Emery LLP based in the Firm’s
Washington, D.C. and Silicon Valley offices. She serves on the Firm's Management Committee
and she is chair of the Tax Controversy Practice. U.S. News and Best Lawyers named
McDermott "Tax Litigation Firm of the Year" for 2014.

Jean has been involved in representing businesses and individuals on significant tax controversy
matters for twenty five years. Substantive issues in dispute have included transfer pricing issues
under Code section 482, tax advantaged transactions, tax accounting issues, insurance tax
matters, the tax treatment of financial instruments, foreign tax credit and research credit issues,
leveraged leases, credit card interchange and original issue discount (OID), excise taxes,
reasonable compensation, estate and gift tax issues, and charitable contribution deductions.

Jean has litigated cases before the U.S. Tax Court, the Court of Federal Claims, U.S. District
Courts, U.S. Courts of Appeal and the Supreme Court. She also has extensive experience with
IRS alternative dispute resolution (ADR) procedures, including Fast Track Settlement, Rapid
Appeals, Post-Appeals Mediation, Pre-Filing Agreements and CAP audits. She also represents
clients who are being audited by the Service’s Global High Wealth Industry Group.

Jean is a frequent writer and speaker on tax controversy matters and has appeared on CBS and
CNBC. She is the contributing editor of a 2014 book on Global Tax Controversies. The Legal 500
has named Jean a “leading lawyer” every year since 2009, and quoted a client who described
her as “A pleasure to work with, clever, an excellent advocate, personable and possessed of an
instinctive business understanding.” She was nationally ranked as a leading tax litigation lawyer
in the 2010, 2011, 2012 and 2013 editions of Chambers USA as “one of the preeminent tax
lawyers in the U.S.” and noted for her “dedication to client service.” Jean was also listed in Best
Lawyers in America 2012, 2013, and 2014.
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Roger J. Jones
Roger J. Jones is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s
Chicago office. Roger specializes in tax controversy and litigation matters representing taxpayers,
including numerous Fortune 500 companies, in over 75 matters at all levels of the Federal court system,
including the United States Tax Court, Federal District Court, the Court of Federal Claims, the United
States Circuit Courts of Appeals and the United States Supreme Court, as well as before various State
courts.
Contact
Chicago
Tel: +1 312 984 2731
Fax: +1 312 984 7700
[email protected]
Education
State University of New
York at Buffalo Law
School, J.D.,
State University of New
York, Buffalo, Ph.D.
State University of New
York, Buffalo, M.A.
State University of New
York, Buffalo, B.A.
www.mwe.com
Roger has been successful in settling tax disputes short of litigation through administrative appeals
procedures, mediation and other alternative dispute resolution processes. His practice also encompasses
Federal and state tax planning, compliance and transactional work, with particular emphasis on transfer
pricing, subpart F, financial instruments, reorganizations and other corporate transactions.
Roger is a frequent speaker at seminars and symposia and has authored several articles on tax matters.
In addition, he was cited as a recommended attorney in World Tax 2010, a guide to the world’s leading tax
firms published by International Tax Review, and was named a Lawyer of the Year for 2015 by The Best
Lawyers in America. Roger has also been recognized by The Legal 500 USA and Chambers USA in the
area of tax controversy.
In 2010, Roger was honored by the University of Buffalo Law Alumni Association with the Distinguished
Alumnus Award for Private Practice.
Roger is admitted to practice in Illinois and New York and before the U.S. Supreme Court; the U.S. Courts
of Appeals for the Second, Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, Tenth, Eleventh, District of
Columbia and Federal Circuits; the U.S. District Courts for the Northern District of Illinois and the District of
Colorado; the U.S. Court of Federal Claims; and the U.S. Tax Court.
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Jane W. May
Jane Wells May is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s
Chicago office. Jane heads the Firm’s State & Local Tax Practice Group. She focuses her practice on
state and local tax matters.
Contact
Chicago
312.984.2115
[email protected]
Education
Vanderbilt University
School of Law, J.D.,
1986
Wittenberg University,
B.A. (with honors),
1980
Jane represents businesses in connection with state and local tax controversies at the audit, administrative
and judicial levels around the United States. Her clients include companies in manufacturing, retailing,
pharmaceuticals, automotive, health care, energy, technology and insurance industries. She has
successfully litigated state and local tax matters raising a variety of statutory and constitutional issues.
Jane has defended numerous internet sellers in several states against cases brought under state
whistleblower statutes, including the Illinois False Claims Act, alleging fraudulent failures to collect and
remit use tax.
Jane also advises business clients on tax planning matters and represents athletes and entertainers in
connection with employment contract issues.
A member of the Taxpayer’s Federation of Illinois Policy Committee, Jane is a regular speaker at seminars
on state and local tax issues. She is a member of the Chicago Bar Association’s State and Local Tax
Committee and is admitted to practice in Illinois. Jane was named a leading tax lawyer in the 2009, 2010
and 2011 editions of The Legal 500 United States, which states that she has “built a noteworthy local and
state taxes practice.” She was also ranked by Chambers USA in 2008, 2009, 2010 and 2011, which notes
that she “is full of energy and brings a wealth of experience to the work.” Furthermore, say the Chambers
rankings, Jane is “excellent from an advocacy point of view” and is considered a “strategic leader” in state
and local tax. She has also been named an Illinois Super Lawyer in the tax area by Law & Politics.
At Vanderbilt University, Jane was senior articles editor of the Vanderbilt Law Review and a member of
Order of the Coif and Moot Court Board.
www.mwe.com
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