You are in the middle of your initial conference with the Appeals Officer. So far, you’ve been able to keep to your well-prepared script. Your protest went through several drafts until you decided that not a word needed to change. Through your preparation for the conference, you learned about the Appeals Officer, the other attendees, and the conference ground rules. Finally, you crafted a presentation worthy of Oscar consideration. (Protest, Preparation, and Presentation were the subjects of our three previous installments.) Now, for the first time, it seems you’ll need to abandon the script. The Appeals Officer and her team are reacting differently than you expected. Don’t despair. You just need Persistence. Here are some pointers about how to engage with the Appeals team.
“You can observe a lot just by watching.” Effective advocates actively engage with their listeners. They watch body language and facial expressions. They pay attention to note taking and, of course, questions. Often, the well-prepared advocate is tempted to get through the material and deal with reactions afterward. This is a mistake, but it’s hard to avoid. A good practice is to have a team approach. While one advocate presents, the others observe the Appeals team, noting reactions and questions. When they see a confused look, they stop the presenter and ask a clarifying question.
There really is no such thing as a dumb question. Regardless of your level of preparation, a significant number of conferences do not go as planned. In fact, it’s best to anticipate that you will depart from the plan so that you won’t be shocked or disappointed. The causes for this deviation are many. For example, not all Appeals Officers are diligent in their preparation. A few seem to wait for the initial conferences (i.e., the pre-conference with exam and the opening conference with the taxpayer) to find out what the case is about. Other times, the Appeals team will reach out to a specialist after your last conversation and before the conference. The specialist’s involvement may lead to a new understanding of the issue and, perhaps, unanticipated prejudice. Finally, Appeals Officers – like everyone else – bring their background and experience into the conference. What choice do they have? They will react to the presentation based on their prior experience and knowledge. Thus, welcome questions, even “dumb” ones; they will help you in the next steps.
Envision the way forward. Of course, well-prepared advocates can address reactions and questions on the fly; however, sometimes, that is not possible. On occasion, Appeals Officers may want to see data presented in a different manner. They may want to understand a technical tax point better. Thus, the advocate has additional work to do. Complex matters typically are not resolved in a single meeting anyway. Note the concerns and questions of the Appeals Officer as precisely as possible. Set a date for a follow-up meeting. Now, go home, sharpen your pencil, and then, over-deliver on these items.
Being prepared to react to a settlement proposal. As we said, complex issues are not often resolved in the first meeting, but sometimes they are. Make sure that you’ve had a frank discussion with your client beforehand. Here are a few thoughts about preparing your client:
- Most Appeals Officers live by the 80-20 rule. Unclear issues are settled in that range. Issues that are above 80 percent or below 20 percent should be conceded by the appropriate party. By the way, most issues are unclear – at least from the Appeals Officer’s perspective.
- A full concession by the government is possible but not likely. Even in clear cut cases, some Appeals Officer will try to extract a nuisance settlement– notwithstanding the 80-20 rule.
- Be patient. If you insist on a quick settlement, the Appeals Officer may quickly propose an unfavorable settlement.
Sometimes clients will authorize a settlement within a range and direct the representative to negotiate accordingly. Even in those situations, an effective representative will get clear approval from the client – even if it’s a phone call during a break in the conference. This is also a good reason to bring a representative from the client to the conference. She will get to hear the IRS presentation in the pre-conference and understand the Appeals team’s concerns from the settlement conference. She will have a better appreciation for what the issue is worth and will be able to recommend a settlement for management approval.
On one occasion, after a 4-hour presentation where the Appeals Officer asked many questions, he announced that he would not concede the issue. We were terribly disappointed, so we asked what range of settlement he would consider. He said that he would not give more than 30%. The taxpayer’s CFO was present and asked whether the Appeals Officer would accept an offer of 30%. When the Appeals Officer confirmed that he would, the CFO slapped the table and said, “Sold!” The taxpayer had recorded a benefit of only 25% for the issue. Thus, he was happy with that resolution.
“Don’t stop believin’!” As we’ve mentioned, conferences rarely go as planned, so don’t fret if the Appeals Officer doesn’t break out in tears and propose a full government concession. Deliver on promised information and authority in a subsequent conference. If the Appeals Officer says that she doesn’t like your position, ask her to explain her concerns. Even if you are not sure how to answer them now, propose a follow-up meeting. That will give you time to discuss the concerns with your client. Perhaps, you’ll need to have a heart-to-heart with your client about the real value of the issue or whether litigation is the next step.
In our final installment, we’ll discuss some pointers about how to bring a settlement to an effective completion. (To keep with our alliteration, we’ll call it Perfection.)
Article by Mark Mesler and Ethan Vernon
