The Tax Division at the American Institute of CPAs has created a task force to respond to a recent IRS proposal that would require companies to disclose their uncertain tax positions.

Douglas Shulman

IRS Commissioner Douglas Shulman told a meeting of the New York State Bar Association’s Tax Section on Jan. 26 that some business taxpayers would be required to report on uncertain tax positions at the time a return is filed (see IRS Commissioner Proposes Changes to Reporting Requirements on Uncertain Tax Positions).

Taxpayers would be required to annually disclose uncertain tax positions by providing a concise description of those positions and the maximum amount of U.S. income tax exposure if the taxpayer’s position is not sustained. The requirement would apply to those who have both a financial statement prepared under FIN 48 or other similar accounting standards reflecting uncertain tax positions and assets over $10 million.

The requirement is intended to make the audit process more efficient for the IRS. “Today, we spend up to 25 percent of our time in a large corporate audit searching for issues rather than having a straightforward discussion with the taxpayer about the issues,” said Shulman. “It would add efficiency to the process if we had access to more complete information earlier in the process regarding the nature and materiality of a taxpayer’s uncertain tax positions.”

The AICPA believes the proposal has many implications and will generate a great deal of debate. The IRS proposal would also have a significant impact on members if it takes effect as Shulman has described it. The institute said it is working on an appropriate response on behalf of its membership.