The Internal Revenue Service's Compliance Assurance Process is a voluntary program operated by the IRS's Large Business and International division that helps corporate taxpayers resolve their tax issues ahead of time with IRS officials before filing a return. But with extensive staffing cuts at the IRS since last year, fresh questions are arising over the usefulness of the CAP program.
A new
The IRS began piloting the CAP program in December 2005 and made it permanent in March 2011. In August 2018, the IRS announced it had recalibrated the CAP program for tax year 2019 with an emphasis on ensuring the taxpayer's eligibility, the application of consistent rules, and better management of resources. There were 123 CAP participants in TY 2023. For TY 2025, the IRS expanded CAP program eligibility to include privately held C corporations, foreign-owned corporations and publicly traded corporations.
After the CAP program was overhauled in 2019, participation declined in part due to stricter eligibility requirements. However, since this decline, from tax years 2019 through 2023, the program has mainly consisted of the same returning taxpayers. Most of the returning participants remain in the CAP or Compliance Maintenance Phases rather than transitioning to the Bridge/Bridge Plus Phase, which was supposed to provide a more resource-efficient option for eligible taxpayers.
The IRS lacks financial metrics to assess the efficiency and effectiveness of the CAP program, according to the report. Although TIGTA's earlier audit in 2013 recommended the IRS develop and implement an evaluation plan to verify that tax administration benefits are being realized in relation to costs incurred, the IRS has not yet established effective metrics to evaluate program savings and doesn't conduct cost-benefit analyses of the CAP program. "Without these metrics, the IRS cannot determine the program's true value or impact on tax compliance," said TIGTA in the new report.
TIGTA also found the IRS still doesn't charge a user fee for taxpayer participation in the CAP program. In a prior audit, TIGTA recommended that the IRS evaluate the CAP program as a potential source of new user fees. From fiscal years 2019 through 2024, the CAP program labor costs averaged $10 million per year. TIGTA believes this much use of IRS resources meets the criteria for a user fee because participation is voluntary and provides benefits to participants. "Implementing a user fee would help ensure that the CAP participants fund these services and would enhance efficiency by encouraging more responsible use of the CAP while increasing cost transparency," said TIGTA.
It pointed to the
One of the main objectives of the CAP program is to resolve taxpayer issues in real time, providing tax certainty prior to filing the return. When a taxpayer receives a partial acceptance letter, it means not all of their issues were resolved at the time of filing the return, which is inconsistent with the CAP program's primary objective. TIGTA's review of tax years 2019 through 2023 found that nearly half of CAP participants received partial acceptance letters and that a substantial number of cases remained open beyond the expected time frames.
The goal of the CAP program is to close cases within 60 days of return filing, which means that most cases should be closed no later than December of the same year when the return is filed. Most tax year 2023 CAP cases should be closed by December 2024, for example, but as of March 2025, 83% of all TY 2023 CAP cases remained open.
TIGTA recommended that the IRS develop quantitative metrics to evaluate the program's effectiveness; reevaluate assessing a user fee for participation in the CAP program; assess the root causes for the high percentage of partial acceptance letters and delayed case closures and develop strategies to increase timely case closure; and implement a tracking mechanism to monitor whether fully disclosed issues are resolved within the 90-day time frame goal. The IRS agreed with three of TIGTA's four recommendations, but didn't agree to reevaluate assessing a user fee for participation in the CAP program. TIGTA maintained that the CAP program provides benefits to participants and therefore, a user fee should be evaluated.
In response to the report, Mablein Baldwin, acting commissioner of the IRS's LB&I division, noted that "in some instances, additional time may be needed to review issues after filing." But she contended that CAP participation provides no "special benefit" as it replaces rather than supplements a traditional post-filing examination and is available to all eligible taxpayers meeting the defined criteria.
