Mediation is an efficient Alternative Dispute Resolution (ADR) tool in almost all justiciable controversies from commercial contracts to domestic relations.  Unfortunately few tax professionals and even fewer taxpayers know that mediation is available as a tool to resolve many tax disputes.

For those not familiar with mediation, mediation is the process of engaging in non-binding negotiations coordinated by and with the benefit of a third party neutral to promote settlement.  Disputing parties may enter mediation by agreement between themselves or, in some cases, by court order.  In either case, the parties are only obligated to negotiate (1) civilly, (2) in good faith, and (3) with the assistance of a neutral mediator.  There is no obligation to agree.  However, the objective of mediation is a full or partial settlement of the parties’ own making rather than a result dictated by a judge, jury, or arbitrator.  Mediation has structure, timing, and dynamics that set it apart from ordinary negotiations.

Mediation is a powerful dispute resolution tool.  Mediation can help parties bridge vast differences to achieve settlement.  The choice of a qualified neutral is critical.  With the right neutral, nations with longstanding blood feuds have reached accords through mediation.  Witness Jimmy Carter’s success at Camp David, which brought peace between Israel and Egypt and which remains the only meaningful peace in the Middle East.   If mediation can bridge the gap between Israel and Egypt, it can help taxpayers and the IRS forge a settlement in a tax dispute.

Mediation is available in tax disputes under the following situations and authorities:

  1. For disputes which have reached the IRS Office of Appeals unresolved, the IRS offers a post administrative appeals mediation program under I.R.S. Rev. Proc. 2009-44.  For Offers in Compromise and Failure to Pay Payroll Tax Penalty Cases, see also I.R.B. 2008-48, Ann. 2008-111, Extended by Ann. 2011-6.
  2. For disputes pending before the United States Tax Court, there are no Court approved ADR plans.  However, the Internal Revenue Manual provides for mediation by agreement between the taxpayer and the Commissioner/District Counsel.  I.R.M, Et. Seq.
  3. For disputes such as refund suits pending before the United States District Court, the Northern District has adopted an Alternative Disputed Resolution Plan, NDGa. L.R. 16.7.
  4. For disputes which have reached the Court of Appeals, the United States Court of Appeals, Eleventh Circuit, has also adopted a mediation plan.  11th Cir. R. 33-1, (b).

All four of these mediation procedures differ in the selection and qualifications of the mediator.  For IRS administrative appeals disputes, Rev. Proc. 2009-44, Sec. 7, specifies that the Mediator shall be an IRS employee selected by the Taxpayer and the Appeals Team Manager from a list of trained IRS Mediators.  But, the Taxpayer may elect to use a non-IRS co-mediator selected by Taxpayer and the Appeals Team Manager from a list of local private, qualified mediators.

For cases pending before the U.S. Tax Court, the mediation process is governed by the I.R.M.  The mediator is selected by the Taxpayer and Field Counsel.  The mediator may be a qualified individual who has no conflict involving representation of the taxpayer.  “The mediator should be an expert in the negotiated settlement process. .  . . [with] mediation training, previous mediation experience, a substantive knowledge of tax law, or knowledge of industry practices.”  Costs may be considered.   Costs must be approved for the Government and are routinely split.  I.R.M., Paras. 1, 3, 6, and 7.

As a precaution for those cases pending before the United States Tax Court, there is no procedure to continue the case from calendar to calendar to permit mediation.  Indeed, the Tax Court has no ADR plan.  However, in the author’s experience in the one instance in which the Taxpayer and District Counsel agreed to refer the case back to IRS Administrative Appeals for mediation, the Tax Court readily granted a continuance.  The case settled at Appeals as we framed the issues for mediation.

For those cases pending before the Northern District of Georgia, the trial judge may refer a case for mediation. NDGa. L.R. 16.7, E.  The neutral mediator is selected either by the judge from lists of three nominees from each party or by the ADR administrator in cases referred to the Court-Annexed ADR Program.  NDGa. L.R. 16.7, F, 1. & 2.

All parties may agree to the referral for mediation or those counsel who desire mediation “may provide the judge with confidential notice, in writing, of that counsel’s desire for ADR.”  NDGa. L.R. 16.7, D., 3.  In the author’s experience, most trial judges routinely refer all cases including Tax cases to mediation if either party expresses an interest.

Finally, the United States Court of Appeals, Eleventh Circuit, has implemented an comprehensive mediation program for all civil appeals including tax cases.  11th Cir. R. 33-1.  The Court normally uses mediators from the Kinnard Mediation Center panel or judges.  However, the parties may agree to use a private mediator at their expense provided that the private mediator has been certified as a mediator for five years, has been practicing for fifteen years, and is currently admitted to the Eleventh Circuit.

The mediation process centers around a Civil Appeal Statement prepared by the appellant which includes portions of the record.  The mediation program is mandatory for those cases selected by the Kinndard Mediation Center.  But either party may request mediation if the case is not initially selected by the Cener.  “Mediations are official court proceedings and the Kinnard Mediation Center circuit mediators act on behalf of the court.”    11th Cir. R. 33-1, (c), (1).  Indeed, failure to submit the Civil Appeal may subject a party to dismissal.  11th Cir. R. 33-1, (f).

In the author’s experience, mediation of tax matters at the Eleventh Circuit has met with little success.  That experience includes cases in which the taxpayer had prevailed at the Tax Court and cases in which the Commissioner had prevailed at the Tax Court or at the District Court.  That experience would auger well for earlier mediation at the trial court or administrative appeals level.

As in all cases, mediation offers an opportunity to resolve a tax controversy at the earliest stage.  Given Taxpayers’ inherent distrust of IRS employees as mediators, the best results would flow from mediations in which the Taxpayer elects to use an additional private mediator in the Administrative Appeals mediation under Rev. Proc. 2009-44, or a private mediator entirely in a pending Tax Court case under I.R.M.

In any case, the mediator cannot be an advocate for either party, the Taxpayer or the IRS.   Thus the selection of a particular private mediator should not affect the outcome of the mediation other than to insure, frank, open, and civil discussions with a candid assessment of the issues and the parties positions.  In doing so, the mediator must point out the weaknesses of a party’s position.  After all, it is the mediator’s duty to help the parties explore the broadest bases for settlement.

“Mediation is a confidential, voluntary problem-solving process in which the participants, after having sufficient information and time, build their own agreements.”  Joy Borum

Daniel L. Britt, Jr.


I.R.S. Rev. Proc. 2009-44
I.R.B. 2008-48, Ann. 2008-111, Extended by Ann. 2011-6.
I.R.M, Et. Seq.
NDGa. L.R. 16.7.
11th Cir. R. 33-1