The taxpayer can then still opt out. In the opt out audit, the issue of willfulness / nonwillfulness can be better developed by the taxpayer and the IRS so that the IRS can made a better determination. Keep in mind that, in that process, at least theoretically, the burden is not on the taxpayer to prove nonwillfulness but on the IRS to prove willfulness. (I say that, but obviously the IRS can do whatever it wants -- it can assert a willful penalty because it does not like the color of the taxpayer's eyes -- until it has to prove willfulness in court.)
As to the process in getting to no in Transition, apparently the decision is made by a committee. It is unclear who the committee is, what its delegated authority is, and who the members are. I have heard in most cases that the decision of the committee is final when announced. There is no review or appeal of that decision. However, I have heard of one practitioner being allowed to make a supplemental submission.
Addendum 8/11/14 9:15 am: I just talked with an Agent who advised that the current procedure was that the agent and his/her supervisor made the decision on the transition certification, with involvement as necessary by the technical adviser, I think some readers had so indicated in their comments. In this regard, Streamlined Transition FAQ 8, here, does provide some role for a central committee in those cases designated for central committee review. There is no indication which cases will be designated. Since the examiner and examiner's manager must concur, perhaps there would be a review if they do not. Or, if the technical adviser did not agree, although I was told that the technical adviser pretty much relies upon the examiner and the manager.Today's Tax Notes Today has an article with related information. Andrew Velarde, Practitioners Disagree on Fairness of Lack of OVDP Retroactivity, 2014 TNT 152-2 (8/7/14). The thrust of the article is on the unfairness of not opening the new Streamlined Program to taxpayers who previously closed out their OVDI/Ps with Form 906. There are two sides presented. First, one practitioner, Larry Campagna, suggests that in the past, those who did not opt out likely had indications of willfulness such that opting out would not be a wise choice. For that category of person, the Streamlined Transition, as administered, would not apply. Second, one practitioner, Josh Ungerman, argued that many who might have been nonwillful and good opt out candidates did not opt out because of the black box nature of the opt out process. Basically, they were scared.
Describing the opt out process, the article says:
Under the opt-out system, taxpayers who were arguably non-willful could take such a position with the IRS and be subject only to small penalties if they were successful in their assertion. Last year an IRS official said the average foreign bank account report penalty in opt-out cases was only between $10,000 and $15,000.The information reported above is necessarily anecdotal. I have heard from only a small number of practitioners. I would appreciate readers comments, particularly sharing their anecdotal experiences to the extent consistent with their representation of their clients and with prudence.