Tax Executives Institute Minnesota Chapter

TEI/IRS Liaison Meeting

May 19, 2015

Jessica Samuel, Territory Manager, RFTH

22

Introduction

Jessica R. Samuel

Territory Manager

Jessicia.R.Samuel@irs.gov

1550 American Blvd East

Bloomington, MN 55425

(651) 726-1525

3

Agenda

Professional ExaminationsPrinciples of Sound Tax AdministrationIDR Enforcement ProcessIssue Resolution Tools

Pre-Filing Agreements (PFA) Fast Track Settlement (FTS) Industry Issue Resolution (IIR) Compliance Assurance Program (CAP)

LB&I Exam ProcessCIC Centralized Classification Process

4

Professional Examinations

Principles of Sound Tax Administration

Accountability

Professionalism

Discipline

Transparency

55

Professional Examinations

Transparency Throughout Entire Audit Process IRS must ensure that the taxpayers know throughout

audit the issues the examiner is considering, why the examiner is raising the issue, the legal argument the examiner is relying upon, and the examiner’s views of the taxpayer’s legal arguments.

Taxpayers must fully participate in all stages of examination Planning Phase Timely presentation of all relevant facts and arguments with

respect to each issue during the examination.

66

Professional Examinations

IDR Enforcement Process

Make IDR Process Efficient and Transparent

LB&I examiners and specialists trained

Meaningful engagement between IRS and Taxpayer

Mandatory Process – No exceptions

77

Professional Examinations

Requirements for Issuing IDRs

IRS and taxpayer to discuss a draft of the IDR and its contents prior to issuance

IDRs are to be issue focused, clear and concise

Issue IDRs with clear, agreed-upon timeframes for response

88

Professional Examinations

IDR Enforcement Process

Applies to IDRs issued in compliance with requirements for issuing IDRs

Mandatory process involves three graduated steps:

1.Delinquency Notice2.Pre-Summons Letter3.Summons

99

Professional Examinations

IDR Enforcement Process Delinquency Notice (Letter 5077)

Discussed with the taxpayer (Tax Manager) and signed by team manager

Pre Summons Letter (Letter 5078) Discuss lack of complete response to Notice with the

exam team (specialist, team and territory management, counsel, DFO)

Territory Manager must sign and discuss Pre-Summons Letter with the taxpayer (Tax Director)

1010

Professional Examinations

IDR Enforcement Process

Summons Discuss lack of complete response to Letter

with taxpayer (VP of Tax) Includes Team Manager, Specialist Manager,

Territory Managers, DFOs and IRS Counsel

Summons prepared and issuance coordinated with IRS Counsel

11

Issue Resolution Tools

Pre-Filing Agreements (PFA)

Fast Track Settlement (FTS)

Industry Issue Resolution (IIR)

Compliance Assurance Program (CAP)

Pre-Filing Agreements (PFA)

Beneficial way to reach agreement on a issue in a cooperative environment before the return is filed.

Revenue Procedure 2009-14 provides the program guidelines.

User fee — $50,000 (Due only if the issue is accepted).

Taxpayers overall satisfaction is 4.7 out of 5.

12

13

Fast Track Settlement (FTS)

Key points about FTS include the following: The FTS program is jointly administered by the LB&I

Division and the Office of Appeals. LB&I agents and taxpayers work together to resolve

outstanding issues while in LB&I’s jurisdiction. The FTS process should be completed in 120 days. Not appropriate for all cases, agents strongly

encouraged to consider Fast Track on ‘unagreed’ issues

The taxpayer retains all standard appeal rights regarding any unresolved issues remaining at the time of termination

14

Fast Track Settlement (FTS)

Appropriate resolution tool when: Issue cannot be resolved at exam level

Factual and Legal Issues

Taxpayer and IRS agree to utilize the program Hazards of Litigation exist

Since program inception through March 2014 Accepted 984 cases Resolution rate over 80%

15

IIR Program – Rev Proc 2003-36

The program goals are to: Address frequently disputed or burdensome business

tax issues that affect a significant number of taxpayers.

Provide clear guidance to reduce the time and resources associated with resolving issues during tax examinations.

The IIR process includes: Issue Submission and Selection

Planning, Analysis and Development

Resolution and Guidance

16

IIR Submission

Taxpayers, associations, and others can submit an issue anytime

No required format, but should include Issue statement and description of why the issue is

appropriate for the program Explanation of the need for guidance and estimated

number of taxpayers impacted Name and phone number of a contact person May include a recommendation as to how the issue

could be resolved. Refer to Rev. Proc. 2003-36 for IIR application process

17

Issues Appropriate for IIR

Issue should have two or more of the following attributes: Uncertain tax treatment of common factual situation, Uncertainty results in frequent, repetitive exam of the

same issue, Uncertainty results in taxpayer burden, Significant and impacts a large number of taxpayers, or Extensive factual development, understanding of

industry practices and views would assist the Service in determining the proper tax treatment.

18

Issues Not Appropriate for IIR

Generally, issues not appropriate for the IIR program include: Issues unique to one or a small number of taxpayers. Issues primarily under the jurisdiction of the Operating

Divisions of the Service other than the LB&I and SB/SE Divisions.

Issues that involve transactions that lack a bona fide business purpose, or transactions with a significant purpose of improperly reducing or avoiding federal taxes.

Issues involving transfer pricing or international tax treaties.

19

CAP Overview

Collaborative program

Pre-file identification and resolution of issues

Efficient use of resources

Tax and financial reporting certainty

20

CAP Program Eligibility

Company assets > 10 million

Publicly-held entity

Privately-held with audited financial statements

No investigation/litigation that limits access to current corporate tax records.

21

CAP Program Background

2005: 17 taxpayers CAP Pilot began

2011: 140 taxpayers CAP Program Permanent

Compliance Maintenance and Pre-CAP added

2014: 185 taxpayers

2015: 194 taxpayers

22

Phases of the CAP Program

Pre-Compliance Assurance ProcessPre-CAP

Compliance Assurance ProcessCAP

Compliance MaintenanceCM

LB&I Examination Process

Update current Quality Examination Process

Leverage LB&I best practices

IDR Process

Claims process for issues not included in the exam plan

23

CIC Centralized Classification Process

Manage exam resources more effectively

Work Cases with higher compliance impact

Central Classification Team - Pilot

24

2525

Questions