This is the sixth in a series of ten client alerts summarizing the key provisions of the Taxpayer Assistance and Service Act (the “TAS Act”), a bipartisan legislative package introduced on February 26, 2026, by Senators Crapo and Wyden to improve service and administration at the Internal Revenue Service (“IRS”). This alert addresses Title VI of the proposed legislation, which focuses on the IRS Independent Office of Appeals. For a general overview of the legislation, please refer to the Introduction of this series and summaries of Titles I, II, III, IV, and V.
Title VI of the TAS Act is designed to strengthen the independence, accessibility, and responsiveness of the IRS Independent Office of Appeals (“Appeals”). These provisions address longstanding concerns that Appeals lacks the staffing, procedural tools, and clearly defined authority necessary to provide taxpayers with a meaningful opportunity to resolve tax controversies without litigation.
Much like the parallel provision in Title IV authorizing the National Taxpayer Advocate to hire attorneys, Section 601 grants Appeals the authority to appoint its own counsel who report directly to the Chief of Appeals rather than the IRS Chief Counsel. These attorneys would not represent the government in litigation, and their legal interpretations would not be binding on the IRS. This provision is intended to ensure that Appeals has access to independent legal advice to support its mission of resolving taxpayer disputes fairly and impartially.
Section 603: Responses to Refund Claims; Appeal Rights for Denied Refund Claims
Section 603 addresses a significant gap in the current refund claims process. Under current law, the IRS does not have a deadline to act on claims for refund, and taxpayers whose claims are denied do not have a clear right to appeal the disallowance to Appeals before filing suit.
This provision would require the IRS to review any claim for refund, make a determination, and – if the claim is disallowed in whole or in part – provide the taxpayer with a detailed written explanation for the disallowance. The explanation must also include instructions for appealing the disallowance to Appeals. The IRS would be required to act by the “applicable date,” which is defined as 12 months after receipt of the claim or such other date as may be agreed to by the IRS and the taxpayer.
If the IRS fails to meet this deadline, the overpayment interest rate on the refund would increase by one percentage point, capped at $500.00 (with adjustments for inflation). Additionally, if the IRS does not act on a claim by the applicable date, the taxpayer claiming the refund may elect to have the claim deemed disallowed, thereby triggering the right to appeal.
Section 603 also creates a formal right to appeal any refund disallowance to Appeals within 30 days of the date the disallowance is mailed (or 90 days for notices mailed to an address outside of the United States). During the appeal (and for 30 days thereafter), the two-year period for filing a refund suit under Section 6532(a) would be suspended. The provision carves out an exception for frivolous claims, which would not be entitled to an explanation or appeal rights. Frivolous claims are defined as positions which a federal court has determined to be frivolous and that the IRS has identified as frivolous.
Section 604: Appeals of Returned Offers
Under current law, taxpayers have the right to appeal a rejection of an offer in compromise or installment agreement to Appeals before the rejection is communicated to them. Section 604 extends this right to situations in which an offer in compromise is returned to the taxpayer because it is determined to be nonprocessable or is otherwise not accepted for processing. Under current practice, these types of returned offers are not subject to independent review, leaving taxpayers with no recourse when the IRS declines to process their offers. This provision would ensure that taxpayers have the opportunity for an independent administrative review before any determination to return an offer is communicated to them.
Section 605: Purpose and Duties of Appeals; Right to Appeal Clarified
Section 605 is the most comprehensive provision in Title VI. It amends the statutory framework governing the Independent Office of Appeals in two key respects.
First, the provision adds to the duties of Appeals by requiring that Appeals “without exception, evaluates and considers all hazards of litigation in resolving any case referred to” it. This codifies a principle long regarded as central to the Appeals mission – settling cases on the merits and the risks each party would face in litigation, rather than solely on the IRS’s litigation posture.
Second, Section 605 replaces the current statutory provision addressing the right of appeal with a broader and more detailed framework. The new provision establishes a general right of appeal for all taxpayers with respect to any IRS determination concerning a “Federal tax controversy,” broadly defined to include: (i) liability for, or any claim for refund of, any tax; (ii) liability for, or any claim for refund of, any penalty or addition to tax; (iii) eligibility for alternatives to collection, such as installment agreements or offers-in-compromise; and (iv) any exercise of discretion by the IRS with respect to any of these three items.
The right to appeal is subject to several enumerated exceptions. Appeals would not be available for: (i) challenges based solely on the constitutionality or validity of a law, regulation, notice, revenue ruling, or revenue procedure, unless a Federal court has rendered a final and unreviewable decision invalidating the provision at issue; (ii) appeals based on positions a federal court has determined to be frivolous and the IRS has identified as frivolous, or appeals relating to penalties imposed for asserting such positions; (iii) matters agreed upon pursuant to a closing agreement; (iv) matters involving taxpayers who are the subject of an active criminal investigation, a pending referral for criminal prosecution, or a pending criminal prosecution, unless IRS Chief Counsel determines that the appeals process would not interfere with the prosecution; and (v) issues in a case designated for litigation by IRS Chief Counsel who is prepared to proceed with litigation in a timely manner.
Conclusion
Taken together, the provisions in Title VI reflect a legislative effort to make the IRS Independent Office of Appeals a more effective, independent, and accessible forum for resolving tax controversies short of litigation. By granting Appeals independent attorney hiring authority, streamlining direct hiring, creating meaningful deadlines and appeal rights for refund claims, extending review to returned offers, and codifying a broad right of appeal subject to clearly defined exceptions, the TAS Act seeks to ensure that taxpayers have a fair and efficient path to administrative resolution of their tax disputes.
The next post in this series will review Title VII, which focuses on Whistleblowers.