Arbitration is not available for all issues. Some of the issues ineligible for arbitration include:

• Legal issues
  
• Issues already in court or litigation
  
• Issues designated for litigation
  
• Collection cases, with certain exceptions
  
• Frivolous issues

Initially introduced as a pilot program, the Arbitration process allows taxpayers and the IRS to jointly request binding arbitration regarding certain unresolved factual issues. During the course of an Appeal, when a limited number of factual issues remain unresolved, either the taxpayer or the IRS can request arbitration and jointly select an Appeals or non-IRS Arbitrator from any local or national organization providing a roster of neutrals. If an non-IRS Arbitrator is selected, both parties will equally share the costs, including compensation, expenses and related fees or costs, of the Arbitrator. In addition, the Arbitrator, and the Arbitrator’s firm, will be barred from representing the taxpayer before the IRS in any pending or future action involving the transactions or issues that were subject to the arbitration.

Rev. Proc 2006-44 becomes effective October 30, 2006.