As part of a move toward issue-based examinations, the IRS’s Large Business and International division has rolled out a compliance campaign process in which the IRS decides which issues representing a risk of non-compliance require one or multiple “treatment streams” to achieve the IRS’s compliance objectives.[i] The IRS has explained that its potential “treatment streams” include “soft letters” (warnings that inform a taxpayer that the position on its return is inconsistent with the IRS’s position and give the taxpayer an opportunity to amend), changes in forms, examinations, and published guidance.
The IRS’s focus on issue-based examinations is intended to improve return selection, identify issues representing a risk of non-compliance and make the greatest use of limited resources, as part of an effort to redefine large business compliance work and to build a supportive infrastructure inside LB&I. Previously, IRS examinations were centered around selecting the returns of large corporate taxpayers to review in order to uncover issues. With these efforts, the IRS is reorganizing its resources to focus on specific areas of concern.
Announced on January 31, 2017, the IRS has identified and selected 13 compliance campaigns in its first wave of LB&I’s issue-based compliance work, based on the IRS’s internal data analysis, suggestions from IRS compliance employees, and feedback from the tax community.[ii] These campaigns reflect areas where the IRS has identified significant compliance issues and are an indication of areas LB&I will be focusing on in future examinations. The following are the initial 13 campaigns:
- IRC 48C Energy Credit Campaign
- OVDP Declines-Withdrawals Campaign
- Domestic Production Activities Deduction, Multi-Channel Video Program Distributors (MVPD’s) and TV Broadcasters
- Micro-Captive Insurance Campaign
- Related Party Transactions Campaign
- Deferred Variable Annuity reserves & Life Insurance Reserves IIR Campaign
- Basket Transactions Campaign
- Land Developers – Completed Contract Method (CMM) Campaign
- TEFRA Linkage Plan Strategy Campaign
- S Corporation Losses Claimed in Excess of Basis Campaign
- Repatriation Campaign
- Form 1120-F Non-Filer Campaign
- Inbound Distributor Campaign
Although no materials relating to these campaigns have been released yet, the IRS has been holding a series of webinars to inform the tax community about these new campaigns. Two webinars have already taken place, on March 7, 2017 and on March 28, 2017. These initial webinars focused generally on the campaign process, including how the campaigns are being implemented and how they will impact taxpayers. Future webinars will discuss more fully the 13 compliance campaigns that have been launched. These webinars are free to the public. Although dates of these upcoming webinars have not yet been announced, information about upcoming webinars can be found on the IRS’s Large Business and International Compliance Campaigns website: http://www.irs.gov/businesses/large-business-and-international-compliance-campaigns.
The IRS will be announcing and launching more campaigns in the coming months.
LACEY STRACHAN – For more information please contact Lacey Strachan at Strachan@taxlitigator.com. Ms. Strachan is a senior tax attorney at Hochman, Salkin, Rettig, Toscher & Perez, P.C. and represents clients throughout the United States and elsewhere in complex civil tax litigation and criminal tax prosecutions (jury and non-jury). She represents U.S. taxpayers in litigation before both federal and state courts, including the federal district courts, the U.S. Tax Court, the U.S. Court of Federal Claims, and the Ninth Circuit Court of Appeals. Ms. Strachan has experience in a wide range of complex tax cases, including cases involving technical valuation issues. She routinely represents and advises U.S. taxpayers in foreign and domestic voluntary disclosures, sensitive issue civil tax examinations where substantial civil penalty issues or possible assertions of fraudulent conduct may arise, and in defending criminal tax fraud investigations and prosecutions. Additional information is available at http://www.taxlitigator.com.
[i] Information about LB&I’s Compliance Campaigns is available here: https://www.irs.gov/businesses/large-business-and-international-compliance-campaigns