February 27, 2020 Pro Bono Matters

Evolution of Settlement Days

By Frank DiPietro, Low Income Taxpayer Clinic, Indiana Legal Services, Inc., Bloomington, IN

This article focuses on the continued evolution of Settlement Days by IRS Counsel offices and Low-Income Taxpayer Clinics (LITC). Settlement Days have grown from humble beginnings of notifying pro se petitioners that IRS Counsel was available to discuss their case on a certain day to full-fledged events including IRS Counsel, revenue officers, examination officers, and LITC attorneys. The Taxpayer Advocate in the 2018 report highlighted the growing need for Settlement Days and their positive effects. While success of Settlement Days is sometimes limited, the expansion of the Settlement Days program continues and appears to have the full support of the IRS Commissioner.

Settlement Days, while not a new trend, have occurred more often over the past few years. Settlement Days aim to alleviate pressure from Tax Court and the IRS by designating a particular day for pro se Tax Court petitioners to discuss their cases with IRS Counsel and LITC attorneys. The goal of these events is to facilitate a settlement between taxpayers and the IRS. These settlements eliminate the need for petitioners to appear in court and for IRS Counsel to prepare for trial. However, there are two primary challenges to successful Settlement Days. First, establishing communication with pro se petitioners and obtaining their attendance on Settlement Days is a major hurdle to the success of the program. Second, the effectiveness of the program depends on actually obtaining settlements between pro se petitioners and the IRS during Settlement Day rather than merely notifying them of the court process and procedures of an upcoming trial.

First Hurdle

I first experienced Settlement Days several years ago, while working with IRS Counsel in Minneapolis/St. Paul. Local IRS Chief Counsel approached the two resident LITCs about making their attorneys available on a particular day to meet with pro se petitioners and discuss their cases with them and IRS Counsel. IRS Counsel and LITC attorneys agreed to schedule a Settlement Day two weeks before Calendar Call. The LITC attorneys drafted a general notification letter about Settlement Day, and the IRS mailed the letters to each pro se petitioner in IRS envelopes. The Settlement Day occurred from 9am-5pm at the University of Minnesota Law School. Of the thirty letters mailed, nine pro se petitioners scheduled appointments on Settlement Day. This was a much higher success rate compared to other Settlement Days sponsored by IRS Counsel offices around the country. Nonetheless, the same formula did not work in Minneapolis for the two subsequent Settlement Days, with only one appointment generated from more than sixty letters sent. Poor taxpayer participation such as this dampens enthusiasm for Settlement Days with LITCs and IRS Counsel offices.

LITCs and IRS Counsel have since attempted other methods to increase taxpayer awareness of-and participation in-Settlement Days. Multiple letters would be sent by IRS Counsel and whenever possible, letters directly from the LITCs themselves to pro se petitioners notifying them of the approaching Settlement Day. Settlement Days would sometimes be conducted at a “neutral” site, such as a local library or LITC office. Settlement Days have been conducted at night or on weekends instead of usual business hours to promote attendance. Also, Settlement Day conferences were expanded so that they did not have to be conducted in person but could be conducted through Webex conference software at LITC offices. Lastly, some IRS Counsel offices began going beyond letters by calling pro se petitioners to notify them of the Settlement Day date and to discuss the benefits of participation and availability of LITC attorneys.

Different facets of these approaches have been used recently by IRS Counsel in Baltimore, Atlanta, and Chicago with some success. At the most recent Settlement Day in Chicago, participants were told that approximately 80 pro se petitioners were contacted and 12 appointments were scheduled. The IRS Commissioner and his office have taken notice of the success of these Settlement Day approaches in achieving taxpayer participation. It is expected that other IRS Counsel offices will make similar efforts to improve taxpayer participation at future Settlement Days.

Second Hurdle

While pro se petitioners’ attendance is the most significant hurdle in making Settlement Days a success, Settlement Days must also generate settlements. Previous IRS and LITC participants at Settlement Days have seen taxpayers express frustration that if they reach settlement, they may have to wait for computational documents or may still be required to attend calendar call. In addition, Settlement Day participants may bring documents that counsel will only now see for the first time. Therefore, there may not be enough time to allow a determination of their cases to be made prior to the Calendar Call date.

To spur settlements, appropriate time must be given for IRS Counsel and LITC attorneys to assess and review all information while still impressing upon petitioners the urgency of upcoming Tax Court dates. Scheduling Settlement Days about 30-45 days prior to the Tax Court Calendar Call allows adequate communication to take place with all parties and time to allow review of all documentation provided. Furthermore, in the unfortunate event that a settlement does not take place, both IRS Counsel and petitioners’ attorneys have sufficient time to prepare for trial.

However, the goal of settlement days should not be just to arrange settlements but also to avoid litigation and expedite collection. At the most recent Chicago Settlement Day, not only did IRS Counsel and LITC attorneys attend, but members from IRS exams, appeals, collections, and even a revenue officer attended. Computational documents and in some cases payment plans were arranged after a basis of settlement was obtained. This is a model of efficiency for Settlement Days in the future as it allows the IRS to essentially close a litigation and collection case at one meeting. It also is a tremendous opportunity for petitioners as they are no longer required to attend Calendar Call and they have a finality to their litigation and future collection case.

Other Developments

At the 2019 ABA Tax Section Meeting in San Francisco, the ABA Tax Section Pro-Bono Committee sponsored a Pro-Bono Clinic to represent pro-se petitioners with upcoming trial dates. The Pro Bono Committee hopes to continue to provide attorneys to assist taxpayers at Settlement Days in future meeting cities. Also, effective September 9, 2019, the Tax Court now allows attorneys to represent clients in the form of limited appearances. A limited appearance allows attorneys to limit representation in scope and duration, including automatic termination at the end of the Tax Court session. However, this limited appearance is more valuable to attorneys at Calendar Call rather than Settlement Days. Pro Bono attorneys at Calendar Call will find these limited appearances more useful as those attorneys typically provide advice and counsel during calendar call and do not wish to continue to represent these petitioners beyond the scheduled Tax Court session.

Best Practices

The embracing and expansion of Settlement Days by IRS Counsel is a tremendous benefit to pro se petitioners. However, there are many factors that contribute to its success or lack thereof. IRS Counsel needs to be actively encouraging pro se petitioners to take part in Settlement Days. Settlement Days are most effective when scheduled at neutral locations with availability on nights and weekends, at least 30-45 days in advance of Calendar Call to arrange for document review and make necessary IRS personnel available. Participation increases dramatically if contact with petitioners is made prior to Settlement Day. Best practices such as those discussed in this article provide the template of a successful Settlement Day. As Settlement Days have evolved from their humble beginnings, they have become a great tool to provide trust between the IRS and taxpayers while providing an efficient means of resolving cases for Tax Court and the IRS.


Section of Taxation members can discuss this article in the ABA Tax Times Community. ➔