I. Introduction
On January 14, 2025, the Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) issued final regulations (T.D. 10030) implementing section 7803(e) of the Internal Revenue Code. Section 7803(e) was enacted by § 1001 of the Taxpayer First Act of 2019 (TFA), which codified the IRS Independent Office of Appeals (Appeals) and prescribed that Appeals consideration should be “generally available to all taxpayers.” Proposed regulations under section 7803(e) were published on September 13, 2022.1 The final regulations, which largely adopt the proposed regulations, identify twenty-four exclusions to the general availability of Appeals consideration and lay out the procedural and timing requirements for requesting such consideration. The final regulations are applicable to requests for Appeals consideration made on or after February 14, 2025.
On January 15, 2025, Appeals announced a pilot program with changes to its Fast Track and Post Appeals Mediation (PAM) programs.2 The pilot program will remove certain pre-conditions for Fast Track consideration, require a senior executive to sign off on a denial of Fast Track, and stipulate that denial of Fast Track must be explained in writing. In addition, PAM will be available following a failed Fast Track.
II. Background
A. Access to Appeals
Prior to 2019, Appeals existed as an IRS program but had no statutory basis. The TFA codified Appeals, adding the “Independent” label, and prescribed that Appeals consideration “shall be generally available to all taxpayers.”3 As envisioned by the TFA, Appeals consideration aims to resolve federal tax controversies without litigation on a fair and impartial basis that promotes a consistent application and interpretation of, and voluntary compliance with, the federal tax laws, and enhances public confidence in the integrity and efficiency of the IRS.4 If the IRS denies a taxpayer’s request for Appeals consideration, for any reason other than the issue involved is a frivolous position within the meaning of section 6702(c), the Commissioner must provide the taxpayer a written notice describing the facts involved, the basis for the denial, and how that basis applies to the taxpayer’s facts, as well as the procedures for protesting the denial.5
Proposed regulations were published on September 13, 2022, to implement section 7803(e) and to adopt the Appeals function prescribed by the TFA. The proposed regulations defined the term “federal tax controversy,” identified twenty-four exclusions to the general availability of Appeals consideration, most of which already existed as part of the historical practice and function of Appeals, and prescribed procedural and timing rules that must be met for Appeals consideration to be available. Despite receiving a number of comments from taxpayers and practitioners noting concern that the exclusions identified in the proposed rules would cause taxpayers and the Government to incur litigation costs in a manner that is counter to the express intent of the TFA, the final regulations adopt the proposed regulations with few substantive changes and minor clarifications throughout.
B. Access to Fast Track Settlement and Post Appeals Mediation
Fast Track gives taxpayers and Exam the option to work with an Appeals officer to resolve issues while a case remains in Exam. Fast Track began in 2001 as an LB&I program but now is available for cases handled by LB&I, SB/SE, and TE/GE. Fast Track can provide a relatively expeditious mechanism for reaching a compromise before the issuance of a 30-day letter and accrual of the increased interest on large corporate underpayments (hot interest).6 PAM allows taxpayers and Appeals to agree to non-binding mediation when they are unable to agree through normal Appeals procedures.
III. Final Procedure and Administration Regulations §§ 301.7803-2 and 301.7803-3
The final regulations define a “federal tax controversy” to mean a dispute over an administrative determination made by the IRS with respect to a taxpayer in administering or enforcing the internal revenue laws that arises out of the examination, collection, or execution of other activities concerning the amount or legality of the taxpayer’s tax liability, a penalty, or an addition to tax under the internal revenue laws. Certain additional administrative determinations are treated as federal tax controversies pursuant to § 301.7803-2(b)(3).
Although Appeals consideration must be “generally available” to taxpayers, the final regulations identify twenty-four exclusive exceptions to eligibility for Appeals consideration, based on the IRS’s authority under section 7805 to “prescribe all needful rules and regulations” to enforce the internal revenue laws. These exceptions include areas the IRS has determined will not be granted consideration by Appeals, as well as matters or issues that are otherwise ineligible for consideration (for example, because they are not a federal tax controversy). Despite receiving a number of comments with concerns regarding the scope of these exceptions, the government finalized the proposed regulations with limited changes. The changes clarified, but did not substantively modify, the exceptions.
The enumerated exceptions generally reflect Appeals’ historic practices since before passage of the TFA. Notable exceptions include arguments challenging the constitutionality of statutes or the validity of regulations, notices, or revenue procedures. The following list includes a sampling of matters ineligible for referral to Appeals under the final regulations:
- Rejection of a frivolous position under section 6702;7
- Penalties, such as under sections 6702 or 6682, for asserting a frivolous position, making a frivolous submission, or providing false information;
- Determinations of whistleblower awards under section 7623;
- Issues resolved in a closing agreement described in section 7121, as well as determinations to enter into or not enter into such an agreement;
- Erroneous returns or rejections of offers in compromise under section 7122;
- Cases in which a criminal prosecution, or recommendation therefor, is pending against the taxpayer for a tax-related offense, except with concurrence of IRS Chief Counsel or the Department of Justice;
- Issues barred from consideration under sections 6320 or 6330, §§ 301.6320-1 and 301.6330-1 of the Procedure and Administration Regulations, or other administrative guidance related to collection due process hearings or their equivalent;
- Adverse actions related to the status of tax-exempt organizations, private foundations, and qualified plans, or a determination involving an obligation and the issuer of an obligation under section 103, when the adverse action is based upon a technical advice memorandum (TAM) issued by an Office of Associate Chief Counsel before an appeal is requested;
- Cases docketed in the Tax Court if the notice of deficiency, notice of liability, or final adverse determination letter is based upon a TAM issued by an Office of Associate Chief Counsel in that case involving an adverse action described immediately above;
- Decisions by an Office of Associate Chief Counsel regarding whether to issue a letter ruling or the content of a letter ruling, including requests for 9100 relief;
- Issues based on an argument that a statute violates the Constitution, absent an unreviewable decision from any federal court holding that such statute is unconstitutional;
- Issues based on an argument that a Treasury regulation is invalid, absent an unreviewable decision from any federal court invalidating the regulation as a whole or the provision in the regulation that is being challenged;
- Issues based on an argument that a notice or revenue procedure failed to comply with administrative law requirements, absent an unreviewable decision from any federal court holding such notice or revenue procedure to be invalid;
- Cases or issues that will not be resolved without full concession by the taxpayer or by decision of the court or that are withheld from Appeals consideration in a Tax Court case;
- Cases docketed in the Tax Court with respect to which the notice of deficiency, notice of liability, or other determination was issued by Appeals unless a narrow exception under § 301.7803-2(f)(1) applies; and
- Cases where Appeals consideration is a prerequisite to jurisdiction of the Tax Court and the taxpayer failed to timely request Appeals consideration.8
Under the procedures laid out in the final regulations, Appeals consideration may only be granted after the originating IRS office has made a final determination on the controversy or has proposed an administrative decision along with an offer for Appeals consideration. A request for Appeals consideration prior to that point is premature unless administrative guidance grants the right to engage Appeals prior to that point in time (e.g., fast track settlement or early referral).
Taxpayers generally have only one opportunity for Appeals to consider a particular federal tax controversy. Taxpayers that participate in an early consideration program (e.g., early referral of an issue to Appeals under Rev. Proc. 99-28) generally retain the opportunity for a traditional appeal, provided a settlement is not reached during the program. Additionally, taxpayers who provide additional factual information may be eligible for reconsideration.
Requests for referral to Appeals must also abide by all requirements set forth in the applicable forms, instructions, or other administrative guidance to be eligible for consideration. Further, there must be sufficient time remaining on the limitations period for Appeals to consider the controversy. The regulations do not define what constitutes “sufficient time.” Appeals’ practice is to require at least 365 days remaining on the statute to accept a case for Appeals consideration, although commonly Appeals will ask for additional extensions.9
Finally, the final regulations provide that the Commissioner is subject to the written notification requirement in relation to a denial for Appeals consideration only if five requirements are satisfied. First, the taxpayer must receive a notice of deficiency under section 6212 prior to requesting Appeals consideration. Second, the issue involved must not be a frivolous position. Third, the taxpayer must not have previously requested Appeals consideration for the same matter or issue in a tax period. Fourth, Appeals must not have previously considered the same matter or issue in a tax period that is the subject of the request (unless considered under an early consideration program). Finally, if the notice of deficiency with respect to which the taxpayer requests Appeals consideration has more than one matter or issue, the taxpayer must request referral to Appeals for all such matters or issues at the same time.
IV. Pilot Program for Fast Track and Post Appeals Mediation
Announcement 2025-6 details a new pilot program with important changes to the Fast Track and PAM programs. The pilot program makes it easier for taxpayers to access Fast Track and PAM. Whereas previously the presence of an issue that was ineligible for Fast Track precluded the entire case from Fast Track, the pilot program allows Fast Track in such cases. Another change is that taxpayers can participate in the Fast Track program without forfeiting the opportunity to later use the PAM process if Fast Track is unsuccessful.
The pilot program also makes it more difficult for the IRS to deny a taxpayer’s request to access Fast Track or PAM. Under the program, a senior executive must sign off on denial of a taxpayer’s request for Fast Track or PAM. For example, denial by Exam in an LB&I case must be approved by the Director, Field Operations. Moreover, the taxpayer must receive a written explanation for why the IRS denied a taxpayer’s request for Fast Track or PAM.
The IRS states that the pilot program is intended to make Fast Track and PAM available in a wider range of cases. The IRS is trying to increase the use of alternative dispute resolution, and the pilot program is one such effort. After two years, the IRS will evaluate the results of the pilot program, including usage and feedback from IRS personnel and taxpayers. They will then decide whether to adjust, discontinue, or make the program permanent.
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1 87 Fed. Reg. 55,934.
2 Ann. 2025-6.
3 I.R.C. § 7803(e)(1), (4).
4 I.R.C. § 7803(e)(3).
5 I.R.C. § 7803(e)(5).
6 See I.R.C. § 6221(c).
7 The IRS publishes a list of positions that it deems frivolous. See Notice 2010-33.
8 § 301.7803-2(c)(1) through (24).
9 See IRM Para. 8.21.2.3.1.
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