Taxation Law Newsletter
Administrative Procedure 635 Early Mediation Program
Below for public comment is a draft
(as of Sept. 5, 2012) of an administrative procedure announcing the
department's new Early Mediation Program. This document is being
circulated for public comment prior to implementation of the
mediation program. The department is anticipating that a limited,
pilot version of the Early Mediation Program will be an alternative
dispute resolution option available to taxpayers by the end of
The Department of Revenue is committed to resolving tax disputes
in an expeditious manner, without sacrificing the quality and
integrity of the resolution of the disputed matters. The Early
Mediation Program expands the range of dispute resolution options
available to taxpayers and, in appropriate cases, offers an
expedited process, potentially avoiding time-consuming and
expensive proceedings. The Early Mediation Program is a pilot
program, administered jointly by the Audit Division, the Legal
Division and the Office of Appeals.
Use of the Early Mediation Program in any particular case is
optional for both the Department of Revenue and the taxpayer.
Early mediation does not eliminate or replace existing
administrative appeal options, including the taxpayer's opportunity
to request a hearing or settlement consideration with the Office of
Appeals if the case is not resolved through the early mediation
The Early Mediation Program is a collaborative dispute
resolution process, designed to resolve all issues in a disputed
matter. A representative of the Office of Appeals, serving as
mediator (and as a neutral participant in the mediation process),
will assist the Audit Division and the taxpayer in understanding
and evaluating the issues in dispute, in order to facilitate
reaching an expeditious and mutually satisfactory resolution
consistent with applicable law. The mediator also may recommend a
settlement based on the mediator's analysis of the issues.
635.2 Case Eligibility
Early mediation is generally available for any audit case in which
the department is proposing to assess tax in excess of $1
Early mediation may be initiated at any time after a matter in
controversy has been fully developed and prior to the issuance of a
Notice of Intent to Assess. A matter may be considered for
mediation after the exit conference between the taxpayer and the
Audit Division and after receipt of a written position statement
from the taxpayer, articulating the taxpayer's position and basis
for disagreement with the Audit Division's proposed
The Department of Revenue will consider mediation where:
- All issues are raised in the course of the audit and the audit
process is substantially complete.
- All claims are filed and examined.
- Issues and facts are fully developed.
- The taxpayer has stated its position in writing.
- The parties are willing to resolve all disputed issues.
When Early mediation is unsuccessful in resolving all issues,
the taxpayer will be offered the opportunity to pursue resolution
through traditional Appeals processes. If the traditional appeals
process is pursued, appeals management will take appropriate action
to fulfill the appeals policy to be fair and impartial. This would
generally involve the assignment of new appeals personnel to the
matter. This policy should be made clear to the taxpayer at the
beginning of the process, and if the taxpayer is unable to accept
this policy, the taxpayer may decide to forgo the Early mediation
option and pursue a traditional appeals process.
635.3 Early Mediation Procedures
Early mediation is an alternative dispute resolution initiative
which may be considered by either the Audit Division or the
taxpayer when there are issues that cannot be resolved between the
taxpayer and the Audit Division alone. If the Audit Division
determines that the audit is likely to result in a proposed
assessment of tax in excess of $1 million, the Audit Division may
discuss the potential use of early mediation with the taxpayer.
Either the taxpayer or the audit manager may suggest participation
in the Early Mediation Program. When a case is identified as
potentially appropriate for early mediation by either the taxpayer
or the Audit Division, the audit manager will discuss the issues
and case with the taxpayer. Discussions should include:
- Suitability of issues for the early mediation process,
- Willingness of both parties to consider alternative resolution
- Adequacy of issue and factual development; and
- Ability of both parties to devote resources to the mediation
Upon reaching agreement to participate in the early mediation
process, both the taxpayer and the audit manager will jointly
complete and submit an Early Mediation Program form to the Office
of Appeals. In addition to the Early Mediation Program form, the
taxpayer must also complete and sign a Consent Extending the Time
for Assessment of Taxes (Form A-37).
If the Audit Division determines that the matter is not
appropriate for mediation, the taxpayer may pursue the traditional
appeals process. The taxpayer may not appeal the Audit Division's
decision not to participate in the Early Mediation Program.
of Interest Imposed Under G.L. c. 62C, § 32(f)
As part of the application process, the taxpayer must sign a
waiver extending the time period for purposes of calculating
interest under G.L. c. 62C § 32(f). The 18-month period for an
audit will be extended by four months (subject to potential further
extension in rare and unusual cases) so that the parties may pursue
resolution through the mediation process.
Division Participation in Early Mediation
The Audit Division is fully involved in the Early Mediation
Program as an equal participant. Audit Division participants will
include those with knowledge and expertise that may contribute to
Representation in Early Mediation
Managers of the Audit and Legal Divisions will determine whether
representatives of the Legal Division will participate in the
mediation as representatives of the Audit Division. The taxpayer
may choose to have professional representation in the mediation
A representative of the Office of Appeals will serve as a neutral
mediator. The mediator will not perform in a traditional Appeals
role, but will use dispute resolution techniques to facilitate
settlement between the parties. In some circumstances, there may be
two representatives from the Office of Appeals, serving as
During early mediation, the taxpayer's and the Audit Division's
representatives, including at least one representative with
decision-making authority from both Audit and the taxpayer, will
meet with the mediator. The taxpayer's and Audit's representatives
should include individuals with the information and expertise
necessary to assist the parties and the mediator during the
The mediator will advise the participants of the procedures and
establish ground rules. The early mediation sessions may include
joint sessions with all parties, separate meetings, or both, as
determined to be appropriate in the judgment of the mediator in
consultation with the taxpayer's and DOR's representatives.
The mediator will use a Mediation Session Report to assist in
planning the mediation session and to report on developments during
the session(s). The Mediation Session Report will include a list of
all issues approved for the Early Mediation Program, a description
of the issues, the amounts in dispute, conference dates, a plan of
action for the early mediation session(s) and other information
useful to the process as determined by the parties and the
mediator. The mediator also will prepare and update an agenda,
which will guide the communications, set the order of issue
discussion, pose questions to clarify the issues and guide the
meetings. During the session(s), the mediator will provide decision
makers from both parties with copies of the agenda and the early
mediation session report.
Generally, the mediator will consider only those issues outlined
in the early mediation session report, except by mutual agreement
of the parties.
During the early mediation session(s), the mediator may propose
settlement terms for any or all issues.
The taxpayer may request to provide a third-party mediator at the
taxpayer's own expense, rather than (or in addition to) using a
mediator provided by the Department of Revenue. The Department of
Revenue will review the taxpayer's request to use a particular
third-party mediator and in the department's discretion, may or may
not for its part accept such request. If the department does
not approve the taxpayer's recommendation of a third-party
mediator, the department at its option, may or may not allow the
taxpayer to suggest an alternative third party mediator. The
third-party mediator must be a professional trained in or otherwise
qualified for mediation work, unrelated to either party, familiar
with federal and Massachusetts tax law and issues, and not
generally engaged in advocacy work in the state and local tax area.
The third party mediator must agree that he or she will not consult
with either party after the mediation process is complete.
If the parties reach agreement as to the terms of a settlement,
the parties will sign the Early Mediation Session Report, updated
to reflect the settlement terms. After the parties and the mediator
sign the Early Mediation Session Report acknowledging a basis of
settlement, the mediator will draft the appropriate settlement
summary to reflect the agreed-upon treatment of the issue. The
settlement agreement will be drafted by the parties.
Settlements reached through the Early Mediation Program will be
entered into under the authority of G.L. c. 62C, § 37C.
Limits for Early Mediation Program
The Early Mediation Program is designed to be an expedited method
for resolving tax disputes. Generally, if the parties are unable to
resolve the matter within four months, the matter will be removed
from the Early Mediation Program and the taxpayer may pursue the
traditional appeals process. Either party may withdraw from the
mediation at any time.
Confidentiality of the Mediation Process
The mediation process is governed by the confidentiality
provisions of G.L. c. 62C, § 21 and G.L. c. 233, § 23C. The
disclosure of any tax information which is discussed during the
mediation is limited by the disclosure provisions contained in G.L.
c. 62C, § 21. Similarly, G.L. c 233, § 23C governs the
confidentiality of memoranda and communication made in the course
of the mediation.
During the course of the mediation, the mediator may meet with
one party, without the other party present. Conversations which
occur during the mediation process will be considered confidential
settlement negotiations. The parties must agree that if the
mediation fails to resolve the disputed matter, the mediator may
not be called to testify in any subsequent litigation. Any
information or documents provided to the mediator may not be
disclosed by the mediator, other than by court order, to any party
outside of the mediation without the express authorization of the
taxpayer and the commissioner.
The parties to any mediation must agree that, if they are unable
to resolve the dispute through mediation, any e-mail,
correspondence or memoranda drafted for the purposes of the
mediation and exchanged during the mediation process, including
documents drafted and/or received by the mediator will be
considered documents provided for settlement purposes and not
subject to admission at the Appellate Tax Board or in any court
without the express written approval of the commissioner and the
taxpayer. Similarly, the substance of conversations and/or
negotiations between the parties or with the mediator will likewise
be considered confidential and inadmissible in proceedings before
the Appellate Tax Board or any court.